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Federal Register / Vol. 83, No. 185 / Monday, September 24, 2018 / Rules and Regulations
Dated: September 18, 2018.
M.M. Dean,
Captain, U.S. Coast Guard, Captain of the
Port Miami.
List of Subjects in 33 CFR Part 165
Harbors, Marine safety, Navigation
(water), Reporting and recordkeeping
requirements, Security measures,
Waterways.
For the reasons discussed in the
preamble, the Coast Guard amends 33
CFR part 165 as follows:
[FR Doc. 2018–20670 Filed 9–21–18; 8:45 am]
1. The authority citation for part 165
continues to read as follows:
■
2. Add a temporary § 165.T07–0731 to
read as follows:
■
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§ 165.T07–0731 Safety Zone; Intracoastal
Waterway, Biscayne Bay, Miami, FL.
(a) Location. The following
coordinates define the temporary safety
zone located in Biscayne Bay, Miami,
FL. All waters of Biscayne Bay
contained within the following points:
Commencing at 25°46′22″ N, 080°10′28″
W; thence southwest to 25°45′33″ N,
080°10′39″ W; thence northwest to
25°45′42″ N, 080°11′05″ W; then
northeast to 25°46′34″ N, 080°10′49″ W;
thence southeast along the shoreline to
origin. All coordinates are North
American Datum 1983.
(b) Definition. The term ‘‘designated
representative’’ means Coast Guard
Patrol Commanders, including Coast
Guard coxswains, petty officers, and
other officers operating Coast Guard
vessels, and Federal, state, and local
officers designated by or assisting the
COTP in the enforcement of the
regulated area.
(c) Regulations. (1) No person or
vessel will be permitted to enter, transit,
anchor, or remain within the regulated
area unless authorized by COTP or a
designated representative.
(2) Persons and vessels desiring to
enter, transit, anchor, or remain within
the regulated area may contact the
COTP by telephone at 305–535–4313, or
a designated representative via VHF
radio on channel 16 to request
authorization. If authorization is
granted, all persons and vessels
receiving such authorization must
comply with the instructions of the
COTP or a designated representative.
(d) Enforcement period. This rule will
be enforced from 2:30 p.m. through 3
p.m., 4 p.m. through 4:30 p.m., and 5:30
through 6 p.m. on October 20, 2018, and
12:30 p.m. through 1 p.m., 2 p.m.
through 2:30 p.m., and 3:30 p.m.
through 4 p.m. on October 21, 2018.
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DEPARTMENT OF VETERANS
AFFAIRS
38 CFR Part 74
RIN 2900–AP97
Authority: 33 U.S.C. 1231; 50 U.S.C. 191;
33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5;
and Department of Homeland Security
Delegation No. 0170.1.
17:46 Sep 21, 2018
During the comment period, VA
received several comments from 17
commenters.
Summary of Comments and VA’s
Response
BILLING CODE 9110–04–P
PART 165—REGULATED NAVIGATION
AREAS AND LIMITED ACCESS AREAS
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VA Veteran-Owned Small Business
(VOSB) Verification Guidelines
Department of Veterans Affairs.
Final rule.
AGENCY:
ACTION:
The Department of Veterans
Affairs (VA) is amending its regulations
governing VA’s Veteran-Owned Small
Business (VOSB) Verification Program.
The National Defense Authorization Act
for Fiscal Year 2017 (‘‘the NDAA’’),
placed the responsibility for issuing
regulations relating to ownership and
control for the verification of VOSBs
with the United States Small Business
Administration (SBA). This regulation
implements the NDAA by referencing
SBA’s regulations governing ownership
and control and adds and clarifies
certain terms and references that are
currently part of the verification
process. The NDAA also provides that
in certain circumstances a firm can
qualify as VOSB or Service-Disabled
Veteran-Owned Small Business
(SDVOSB) when there is a surviving
spouse or an employee stock ownership
plan (ESOP).
DATES: This rule is effective on October
1, 2018.
FOR FURTHER INFORMATION CONTACT: Tom
McGrath, Director, Center for
Verification and Evaluation (00VE),
Department of Veterans Affairs, 810
Vermont Ave. NW, Washington, DC
20420, (202) 461–4600. (This is not a
toll-free number.)
SUPPLEMENTARY INFORMATION: In Public
Law 114–840, the NDAA designates the
SBA as the Federal Agency responsible
for creating regulations governing
ownership and control. This rule
amends VA’s verification regulations in
order to implement the NDAA as
regulations relating to and clarifying
ownership and control are no longer the
responsibility of VA.
On January 10, 2018, VA published in
the Federal Register (83 FR 1203) a
proposed rule to amend its regulations
governing its VOSB Program. The
proposed rule allowed for a comment
period ending on March 12, 2018.
SUMMARY:
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A. General
VA received several comments that
described the commenters’ views and
experiences without any reference to a
proposed regulatory provision. VA is
unable to respond to these comments as
they did not address the proposed
provisions at issue here. One
commenter questions the VA’s authority
with regards to the verification process
and disagrees that the VA is authorized
to issue regulations and make
determinations of ownership and
control. The commenter contends that
VA’s function with respect to
verification should be limited to
verifying veteran and disability status,
and maintaining the VA list of verified
SDVOSBs and VOSBs. Although the
authority to issue regulations setting
forth the ownership and control criteria
for SDVOSBs and VOSBs now rests with
the Administrator of the SBA, the
Secretary is still charged with verifying
that each applicant complies with those
regulatory provisions prior to granting
verified status and including the
applicant in the VA list of verified
firms. As the Secretary still maintains
this authority and responsibility, VA
finds the commenter’s proposed
limitation without merit. However, to
eliminate any confusion as to whether
the Secretary is attempting to regulate
ownership and control requirements,
VA will refer directly to SBA’s
regulations where appropriate. This will
additionally allow VA’s regulation to be
immediately updated should SBA make
regulatory changes related to ownership
and control. Several other commenters
discussed their personal difficulties
with the verification process, how
regulatory provisions are interpreted,
and the manner by which the
verification process is administered. As
these comments do not address the
proposed regulation, VA is unable to
respond to these comments.
B. Section 74.1
For consistency, § 74.1 proposed
removing all references to VetBiz and
replacing the words Center for
Verification and Evaluation, servicedisabled veteran-owned small business,
the Department of Veterans Affairs,
Vendor Information Pages, and veteranowned small business, and uses in their
place the respective abbreviations—
CVE, SDVOSB, VA, VIP, and VOSB in
titles and the body of the regulation,
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respectively. VA received no comments
on this proposed change and is therefore
adopting the abbreviations exactly as
proposed. As these abbreviations are
used through the proposed
amendments, all such abbreviations as
they appear will be adopted as
proposed.
VA proposed amending § 74.1, which
sets forth definitions important to the
Vendor Information Pages (VIP)
Verification Program, to remove six (6)
definitions from § 74.1 that relate to and
clarify ownership and control.
Specifically, VA proposed removing the
following definitions: day-to-day
management, day-to-day operations,
immediate family member, negative
control, same or similar line of business,
and unconditional ownership. VA
proposed deleting one additional
definition, Vet.Biz.gov, to account for
changes to the location of the Vendor
Information Pages (VIP) database. VA
did not receive any comments on these
proposed removals and is therefore
adopting these removals as proposed.
VA additionally proposed amending
§ 74.1 to add three new definitions.
Specifically, VA proposed to add a
definition for ‘‘applicant’’ in order to
clarify the use of the term throughout
the regulation, a new definition
‘‘application days’’ in order to clarify
how the time period in § 74.11(a) is
computed, and a definition http://
www.va.gov/osdbu is added to identify
the hosting website as VA is replacing
VetBiz.gov as the host of the VIP
database. VA did not receive any
comments regarding the new definition
http://www.va.gov/osdbu. Therefore, VA
is adopting that definition exactly as
proposed. VA received one comment
regarding the new definition
‘‘applicant’’ that it should be renamed
participant since it is a benefit Veterans
earn. In response, the definition of
applicant refers to a business concern
that applies for verified status, but has
not yet completed the process and
received an approval letter from CVE.
Additionally, the regulations already set
forth a unique definition for participant.
Therefore, VA is not changing the
definition of ‘applicant’ and will adopt
the definition as proposed. VA received
one comment on the proposed
definition for ‘‘application days’’. The
comment requested additional clarity as
to the period that would be counted as
‘application days’. Though not in direct
response to the definition of application
days, VA received additional comments
concerning when the 90-day application
period begins. In response to these
comments, VA agrees that additional
clarification is needed. Accordingly, the
commenters’ recommendations are
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accepted in part and VA is further
revising the language of § 74.1 to add a
new definition ‘‘register’’ to clarify
when the 90-day application period
begins to run.
VA additionally proposed amending
§ 74.1 the following sixteen (16)
definitions: Center for Veterans
Enterprise, joint venture, Office of Small
and Disadvantaged Business Utilization,
non-veteran, participant, primary
industry classification, principal place
of business, service-disabled veteran,
service-disabled veteran-owned small
business, small business concern,
surviving spouse, vendor information
pages, verification eligibility period,
veteran, veterans affairs acquisition
regulation, and veteran-owned small
business.
VA received no comments on the
proposed changes to the following four
definitions: Center for Veterans
Enterprise, non-veteran, vendor
information pages, and Veterans Affairs
acquisition regulation. Therefore, VA is
adopting those definitions exactly as
proposed.
VA did not receive any specific
comments on the definitions participant
and small business concern. However,
the NDAA has removed the
responsibility of issuing regulations
governing ownership and control from
VA and transferred the responsibility to
the SBA. The SBA has issued proposed
regulations governing ownership and
control which includes definitions for
participant and small business concern.
To eliminate any confusion, VA will
refer directly to SBA’s regulations when
defining the terms participant and small
business concern.
VA proposed amending the definition
joint venture to conform to the
amendments to 13 CFR part 125. VA
received several comments from one
commenter regarding this proposed
change. The commenter expressed
support of VA’s proposed definition, but
expressed concern it would lead to VA
and SBA having conflicting rules on the
definition of joint venture. This concern
appears to be based on an assumption
that VA will not apply the applicable
joint venture requirements, and
exceptions, found in SBA’s regulations.
However, this is not the case. Proposed
§ 74.5 would provide further guidance
on joint ventures and refers to SBA’s
regulations directly. Accordingly, VA
and SBA will treat joint ventures the
same way. Though the commenter
expressed concern that the SBA’s
regulations would, in certain
circumstances, allow a large business to
partner with a small business, the
NDAA requires that VA and SBA create
uniform eligibility criteria for SDVOSB
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firms, which includes those firms
structured as joint ventures.
Accordingly, VA will not alter the
definition of joint venture and is
adopting it exactly as proposed. VA
proposed amending the definition of
Office of Small and Disadvantaged
Business Utilization to more accurately
reflect the role fulfilled by this office
with respect to VOSB matters. The
definition included a provision stating
that ‘‘[t]he Executive Director, OSDBU,
is the VA liaison with the SBA.
Information copies of correspondence
sent to the SBA seeking a certificate of
competency determination must be
concurrently provided to the Director,
OSDBU.’’ VA received one comment
that authorizations regarding certificates
of competency should be removed or
addressed as part of the VAAR. Though
certificates of competency do relate to
contracting matters, VA sought to create
a definition that fully describes that
functions of the Office of Small and
Disadvantaged Business Utilization. In
addition, due to the overlapping nature
of the verification and acquisition
programs, there will be occasions where
the regulation speaks to issues relating
to contracting as well as verification.
Accordingly, VA will not alter the
definition of Office of Small and
Disadvantaged Business Utilization and
is adopting it exactly as proposed. VA
proposed amending the definition of
primary industry classification to make
a technical change to use the acronym
NAICS as it has already been defined in
a parenthetical earlier in the definition.
VA received two comments on the
definition primary industry
classification. Both commenters stated
the definition was unnecessary. VA
responds that this definition was not a
new addition, and the only proposed
change was to make a technical change
to utilize the acronym ‘NAICS’.
Moreover, VA believes the definition is
warranted as firms list their business
type and associated NAICS codes on the
firm’s business profile. Therefore, VA
will not make any changes to this
definition and is adopting it exactly as
proposed.
VA proposed amending the definition
of principal place of business to change
day-to-day operations to daily business
operations in order to match the
wording in 13 CFR 125.13. VA received
two comments to the definition
principal place of business. Specifically,
one commenter sought to expand the
definition to refer not only to day-to-day
operations but long-term operations as
well. Another commenter questioned
the need for the definition. VA responds
that the proposed change was intended
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to create uniformity between the VA
and SBA regulations as SBA is now
responsible for issuing regulations
governing the ownership and control
requirements for SDVOSBs.
Accordingly, the commenter’s proposed
expansion is outside of VA’s authority
to regulate and therefore VA is adopting
the definition exactly as proposed.
VA proposed to amend the definitions
for service-disabled veteran, servicedisabled veteran owned small business,
surviving spouse, veteran, and veteran
owned small business to align with
SBA’s proposed definitions for these
terms. Initially, VA proposed to amend
these definitions by incorporating the
exact language contained in the NDAA
and utilized by SBA in its proposed
rule. VA received numerous comments
on the proposed revisions. One
commenter expressed concern that
SBA’s definitions did not provide
sufficient guidance. Several commenters
requested that VA include clarifying
language when referencing ESOPs
within the definitions. Two other
commenters requested VA clarify the
term ‘‘permanent and severe’’ disability
as used in the definitions. Numerous
commenters recommended additional
revisions to the proposed definition for
surviving spouse, primarily requesting
the VA expand the eligibility criteria for
individuals attempting to qualify as a
surviving spouse. VA responds that the
NDAA transferred the authority from
VA to the SBA to make such substantive
changes to definitions that impact
ownership and control of SDVOSBs.
Rather, VA’s charge is verifying that
firms meet the ownership and control
requirements promulgated by SBA.
Accordingly, VA finds the revisions
suggested by the commenters are
outside the scope of the proposed rule.
However, VA acknowledges the
potential that SBA may in the future
amend these regulatory requirements,
either as a result of statutory changes or
on its own. To account for these
potential changes, and eliminate any
confusion as to whether VA is
attempting to create unique definitions,
VA will alter the language of the above
definitions to explicitly state the terms
will have the same meaning as set forth
in SBA’s regulations.
VA proposed amending the definition
of verification eligibility period to
reflect the current eligibility period of 3
years, which was effectuated via
publication in the Federal Register on
July 12, 2017 at 82 FR 32137. VA
received one comment regarding this
proposed change. The commenter
expressed concern that the eligibility
period subjects verified concerns to
onerous and expensive re-certifications.
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VA responds that the proposed change
is only a technical change to align the
definition with the actual eligibility
period that was made effective in a final
rule published in the Federal Register
on July 12, 2017 (82 FR 32137), which
amended § 74.15 to reflect the current
three-year eligibility period. Therefore,
VA will not alter the language of the
definition and is adopting it exactly as
proposed.
C. Section 74.2
VA proposed amending § 74.2(a) to
add the clause ‘‘submitted required
supplemental documentation at http://
www.va.gov/osdbu’’ to clearly explain
the key steps necessary to submit an
application and obtain verification. VA
received one comment that the
proposed additional language
referencing ‘‘required supplemental
documentation’’ is unnecessary. The
provision providing for submitting
supplemental documentation is not a
new concept to the regulation. It is a
recognized method for verifying
applicants and was previously
described in § 74.11. As the amendment
is merely reordering the regulation to
provide more clarity and the comment
does not propose a substantive change,
VA will adopt the language of § 74.2(a)
exactly as proposed.
VA proposed amending § 74.2(b) to
amend the title to reference the System
for Award Management, to address the
impact of criminal activity on eligibility,
to grant the VA authority to exclude all
principals of the concern, and to specify
that the debarment of any individual
will impact the concern’s eligibility. VA
received one general comment on all
circumstances where there is an
immediate removal and that any such
removal should have an appeals process
where no final action should not be
taken until the appeal is resolved. VA
additionally received several comments
on § 74.2(b). One comment is that there
are sufficient legal certifications,
statutes and remedies that would render
offerors ineligible. A second is that the
terms are ambiguous and invite arbitrary
and capricious judgement that can lead
to denial of due process. Another
commenter suggested that the definition
be revised to be brought in line with the
requirements for the SBA’s 8(a)
Program, to provide for reviewing
criminal violations on a case-by-case
basis. In response, the amendments to
§ 74.2(b), currently titled ‘‘good
character’’ are merely to provide clarity
to circumstances under which a
company is currently subject to removal
on the grounds of good character as
opposed to cancellation. Persons found
guilty of, or found to be involved in
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criminally related matters or debarment
proceedings have received due process
through whatever administrative or
criminal proceeding giving rise to the
removal. VA is not an additional level
of review, but merely acting on
determinations issued by courts or other
administrative bodies or processes.
Additionally, VA has mirrored the
causes for immediate removal on those
set forth in FAR 9.4, which sets forth
means by which concerns can be
deemed ineligible to receive any federal
contract. The concept of immediate
removal has been an integral component
of § 74.2 since 2010. It has been used as
a streamlined method of removing
companies found ineligible for VA’s set
aside procurement program. In both
2010 and 2012, GAO published reports
tasking VA with reducing potential
instances of fraud and abuse. VA has
found in its administration of the
verification program that the use of the
procedures identified in § 74.2 protects
VA acquisition integrity and diminishes
ongoing exposure to fraud, waste, and
abuse. The United States Court of
Federal Claims in the case of Veterans
Contracting Group, Inc., v. United
States, No. 17–1015C, pg. 10 (Dec. 21,
2017) recognizes that immediate
removal does not necessarily trigger a
loss of due process protections. Finally,
all examinations of business entities,
concerning issues of criminality or
otherwise, are conducted on a case-bycase basis and take into account all
relevant facts. Amending the regulation
to further mirror the SBA’s 8(a) program
regulations is unnecessary. As VA views
the proposed amendments as merely
adding clarity to the current process and
that no other comments have been
received on the other amendments to
§ 74.2(b), VA adopts the amendments
exactly as proposed.
VA proposed amending § 74.2(c) by
adding the phrase ‘‘false statements or
information’’ to reference the title and to
provide further clarification on
eligibility requirements. VA
additionally proposed amending
§ 74.2(c) to clarify that removal is
immediate and to remove the word
‘‘the’’ before CVE in the last sentence of
the section. One commenter supports
the amendment stating that submitting
false statements should be stringently
enforced. VA received a comment that
submitting false statements is a felony
and that an independent VA
determination that a company made
false statements can lead to denial of
due process. VA received another
comment that a determination by CVE
as to whether false statements exists is
redundant, ambiguous, could be
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subjectively arbitrary, and is not
authorized. In response, the
amendments to § 74.2(c) are intended to
clarify current interpretation and policy.
The current language of § 74.2(c) has
always been interpreted to allow for
immediate removal upon a
determination that a concern knowingly
submitted false information. The
proposed amendment adds the word
immediate to remove any ambiguity.
With respect to potential due process
issues, VA offers the response provided
in VA’s response to comments made to
§ 74.2(b). As VA views the proposed
amendments as merely adding clarity to
the current process and that no other
comments have been received on the
other amendments to § 74.2(c), VA
adopts the amendments as proposed.
VA proposed amending § 74.2(d) by
including tax liens and unresolved
debts owed to governmental entities
outside of the Federal government as
disqualifying an applicant. VA also
proposed amending the title of the
section to remove the word federal to
reflect that both federal and local
obligations may disqualify an applicant
and to provide that participants that no
longer qualify under § 74.2(d) will be
removed in accordance with § 74.22. VA
received one comment that expanding
unresolved debts owed to government
entities outside the Federal government
is overreaching and outside the
expertise of the VA. VA received
another comment that including
outstanding obligations of all state and
local jurisdictions where a company
does business is impractical, invites
arbitrary and capricious determinations
and can lead to a denial of due process.
VA received two additional comments
that the proposed language could
potentially disqualify both a business
entity that has either a legitimate tax
dispute or a business entity that entered
into a payment plan. Including
unresolved debts owed to state and local
governmental units is an appropriate
amendment to the regulation
considering the significant
governmental benefits that a verified
concern may become eligible.
Furthermore, failure to qualify on the
grounds of outstanding financial
obligations is not an immediate
disqualifying event which may trigger
due process considerations.
Specifically, in accordance with § 74.22,
a business concern may provide any
explanation deemed appropriate to
explain the circumstances of any
outstanding financial obligation,
regardless of the jurisdiction. Thus, so
long as the business entity provides an
adequate response to a cancellation
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proceeding, the business will not be
removed from the VIP database. VA
does not find that expanding the
regulation to include unresolved debts
owed to state and local governmental
units as overly burdensome or that there
is a potential due process violation.
Therefore, as there are no other
comments, VA is adopting § 74.2(d) as
proposed.
VA proposed amending § 74.2(e) to
clarify the consequences of SBA protest
decisions and other negative findings
and to amend the title of the section. VA
received one comment that supports
immediate removal on the basis of
negative findings, but recommends that
more examples should be provided
because it is otherwise overly broad. VA
received a second comment that there
should be a clear process to determine
ineligibility including during an appeal
to prevent due process violations. VA
received another comment that there is
clear law and regulation on the
ramifications of SBA protests decisions
and negative findings. The proposed
amendments to § 74.2(e) merely seek to
clarify CVE’s current process and to
confirm that SBA decisions and other
negative finding are subject to
immediate removal as opposed to
cancellation. Other than reordering the
language and clarifying the treatment of
status protests and other negative
findings, § 74.2(e) does not propose any
substantive changes. Treatment of
negative findings is not a new concept
in the regulation rather the proposed
change is written to encompass all
negative findings, regardless of origin.
In addition, as immediate removal is not
a new concept, the proposed change
does not implicate any new due process
issues. Moreover, the potential negative
determinations would be the result of a
proceeding in which the aggrieved party
would have been given notice and an
opportunity to be heard. As VA views
the proposed amendments as merely
adding clarity to the current process and
that no other comments have been
received on the other remaining
amendments to § 74.2(e), VA adopts the
amendments as proposed.
VA proposed amending § 74.2 to
include paragraph (f) that specifically
requires that all applicants for VIP
verification must be registered in the
System for Award Management (SAM).
As VA did not receive any comments on
this change, VA adopts the amendment
as proposed.
D. Section 74.3
VA proposed amending § 74.3 to
reflect that ownership is to be
determined in accordance with 13 CFR
part 125 as the result of the
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requirements outlined in the NDAA. To
put into effect this legislative change,
VA proposed amending § 74.3(e) to
redesignate it as § 74.3(b) to account for
the removal of paragraphs (a)–(d). As
VA did not receive any comments on
this change, VA adopts the amendment
as proposed.
VA proposed amending § 74.3(b)(1)
and (3) by a technical change to replace
‘‘application’’ with ‘‘VA Form 0877’’ in
order to clarify the requirement and
conform language to the rest of the
regulation. VA also proposed amending
§ 74.3(b)(1) to add a 30-day time period
for submission of a new application
after a change in ownership. This time
period provides CVE the ability to
definitively and accurately track
changes of ownership. VA received one
comment that recommends that the time
a business should notify VA of a change
in ownership should be clarified to
begin on the date the concern finalizes
the change within the business’s
corporate documents. VA understands
the comment, but further clarification
would not change the basic notification
requirement. A business organization
should provide notice of a change at the
time is occurs. VA received additional
comments on § 74.3 recommending that
§ 74.3(b)(2) and (3) be removed and
addressed in the VAAR as these
provisions relate to functions of
contracting officers. In response, the
amendment to § 74.3(b)(2) is merely a
renumber of an existing regulation with
no change in content. Additionally,
while this provision may also implicate
contracting issues, VA believes it is
important for applicant firms to
understand how future changes can
impact eligibility. Similarly, § 74.3(b)(3)
is nearly identical to the prior provision
except for a technical change that
indicates that a new application is filed
with VA and not the contracting officer.
VA sees no basis in making any
additional amendments to the
regulations based on the comments. As
no other comments on the remaining
proposed amendments to § 74.3(b) were
received, VA is adopting the
amendments exactly as proposed.
E. Section 74.4
VA proposed amending § 74.4(a) to
state that control is determined in
accordance with 13 CFR part 125
pursuant to the NDAA. VA also
proposed removing paragraphs (b)
through (i) upon that same basis.
Although VA did not expressly note that
it was removing the designation for
paragraph (a), since there will not be
any other paragraphs, VA proposes
removing the designation for paragraph
(a), as it is unnecessary. VA did not
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receive any comments on the proposed
amendment to § 74.4 other than as
previously discussed. Therefore, VA is
adopting the amendments as proposed.
F. Section 74.5
VA proposed amending § 74.5 to
include joint ventures. The section is
additionally reworded to clearly
establish that 38 CFR part 74 does not
supersede 13 CFR part 121 with respect
to size determinations. VA adds
paragraph (b) to specifically address
eligibility of joint ventures. Paragraphs
(b)(1) and (2) are added to provide
notice of applicable requirements
outlined elsewhere in VA regulation.
VA did not receive any comments on
the proposed amendment to § 74.5 other
than as previously discussed and is
therefore adopting the amendment as
proposed.
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G. Section 74.10
VA proposed amending § 74.10 to
remove reference to the physical
address for CVE so to allow address
changes without the need for an
amendment to the regulation. VA did
not receive any comments on the
proposed amendment to § 74.10 and is
therefore adopting the amendment as
proposed.
H. Section 74.11
VA proposed amending § 74.11(a) to
outline its new application processing
procedures and various editorial nonsubstantive conforming changes.
Additionally, VA proposed amending
§ 74.11(a) to incorporate the term
‘application days’ and to increase the
application processing time to 90
application days, when practicable. VA
received comments that expressed a
concern that the term registration as
referenced in § 74.11(a) is unclear. VA
provided a response above which
addresses this concern. Specifically, VA
agrees that that the regulation could be
clearer, and has included a definition
for the term register. VA believes the
additional definition adequately
addresses the commenter’s concerns,
and therefore does not find any
additional revision to § 74.11(a) to be
necessary. VA proposed adding a new
§ 74.11(c) to address instances where
CVE does not receive all requested
documentation. In order to comply with
VA’s statutory charge to verify
applicants for the VIP database, VA
requires documentation to demonstrate
eligibility. VA received comments on
§ 74.11(a) and (c), respectively, that
subjectivity should be removed from the
meaning of ‘‘conforming
documentation’’ and the meaning of ‘‘to
adequately respond.’’ In response, there
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is no one requirement for conforming
documentation or providing adequate
responses. Conforming documents are
documents that respond to a specific
request. Adequate responses are
responses that provide answers to a
specific inquiry. For example, if a
request is to provide the last three years’
business income tax returns and only
one year is provided, without providing
the other two years or a letter of
explanation, conforming documents
have not been provided. It can also be
said that the response was not adequate.
VA sees no basis in making any
additional amendments to the
regulations based on the comments. As
no other comments on the remaining
proposed amendments to § 74.11(a) and
(c) were received, VA is adopting the
amendments exactly as proposed.
VA proposed redesignating § 74.11(c)
as § 74.11(d) and adding the term
‘‘totality of circumstances’’ as the
standard of review for reviewing an
applicant’s eligibility. VA also proposed
amending § 74.11(d) by referencing
§§ 74.11(b) and (c) and 74.13(a) as
exceptions to the totality of
circumstances standard and to state that
the burden of establishing VOSB status
is on the applicant. VA received one
comment on § 74.11(d) but it was
mislabeled and should have been a
comment to § 74.11(h). As VA did not
receive any comments on the proposed
amendment to § 74.11(d), VA is
therefore adopting the amendment as
proposed.
VA proposed redesignating § 74.11(d)
as § 74.11(e) and proposed amending
the first and second sentences by
removing the word ‘‘adversely.’’ VA also
proposed removing the third sentence as
it refers to withdrawal or removal of
verified status. This scenario is
addressed in § 74.21 in cancellations,
which specifically outlines participants
can exit the VIP database. This proposed
removal helps to eliminate redundancy
and reduce the likelihood of confusion.
VA also proposed adding new
§ 74.11(e)(1) to specifically address
bankruptcy as a changed circumstance.
As VA did not receive any comments on
the proposed amendments to § 74.11(e),
VA is therefore adopting the
amendments as proposed.
VA proposed redesignating § 74.11(e)
as § 74.11(f). Section 74.11(f) outlines
the CVE Director’s options in issuing
determination letters. VA received one
comment on § 74.11(f) that voluntary
withdrawals should be included as a
third decision option. In response, other
than redesignating the section
numbering, § 74.11(f) does not propose
any substantive changes. Furthermore,
§ 74.11(f) only speaks to decisions by
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CVE. As a withdrawal would be the
choice of the applicant, made available
to applicants prior to a formal adverse
decision being issued by CVE, VA does
not believe it should be addressed in
this subsection. As § 74.11(f) is only
meant to speak to final determinations,
no revisions will be made to § 74.11(f).
VA is therefore adopting the
amendments as proposed.
VA proposed redesignating § 74.11(f)
and (g) as § 74.11(g) and (h),
respectively. Section 74.11(h) outlines
the methods for delivering
determination letters. VA also proposed
amending § 74.11(h) to add a second
sentence requiring firms to update their
contact information. VA received one
comment on § 74.11(h) that VA should
remove all reference to alternative
means of transmitting decisions since
the VA only uses electronic mail. In
response, while is it true that VA
routinely transmits decisions by email,
alternate delivery options are always
available and might be necessary to
account for unforeseen circumstances.
As no additional comments on the
remaining proposed amendments to
§ 74.11(g) and (h) were received, VA is
adopting the amendments exactly as
proposed.
I. Section 74.12
VA proposed amending § 74.12 to
expand the list of required
documentation routinely requested by
CVE. This list includes documents
previously referenced in § 74.20(b). VA
additionally proposed amending § 74.12
so that the term ‘‘electronic form’’
would be changed to ‘‘VA Form 0877’’
and the term ‘‘attachments’’ would be
changed to ‘‘supplemental
documentation.’’ VA also proposed
amending § 74.12 by removing the last
two sentences in the section. VA
received several comments on the
proposed revisions to § 74.12. However,
none of the comments spoke to the
proposed amendments. One comment
questioned the need for the terms
‘‘principal place of business’’ and
‘‘primary place of business’’ in § 74.12.
In response, the term ‘‘principal place of
business’’ is used to identify the place
where a complete copy of all
supplemental documentation used in
verification examinations is to be
retained. The term ‘‘primary place of
business’’ is not used in § 74.12.
Another comment is that the required
documents outlined in § 74.12 are not
required for every set of circumstances
and that the regulations do not provide
for exceptions for unavailable or
irrelevant documents. In response, VA
understands that not all documents are
available or required for every business
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structure. In such cases, VA accepts
letters of explanation. If the explanation
reasonably explains the unavailability of
the document or information, the
document will not be required. For
example, if a corporation does not have
an operating agreement and an
explanation is provided that operating
agreements are not required for
corporations, VA would accept that
explanation. One commenter suggested
that there should be an appeal process
when an applicant believes that the
document request is overreaching. In
response, VA states that there is an
appeals process. However, the process
relates to final determinations made by
CVE. Ultimately, a firm bears the burden
of demonstrating eligibility with the
verification requirements. If CVE does
not receive sufficient documentation to
allow the office to conclude the firm
satisfies the verification requirements, it
will deny the concern verified status. In
accordance with the NDAA, appeals are
to be filed with SBA’s Office of Hearings
and Appeals (OHA) in accordance with
13 CFR part 134. VA sees no basis to
make any additional amendments or
adjustments to the regulations based on
the comments to § 74.12. Accordingly,
VA is adopting the amendments exactly
as proposed.
J. Section 74.13
VA proposed amending § 74.13 to
modify the title and to remove
references to the reconsideration
process. In accordance with the NDAA,
appeals of initial denials on the grounds
of ownership and control will be
adjudicated by SBA OHA. VA
additionally proposed amending
§ 74.13(a) to refer to the appeal process
set forth in 13 CFR part 134. VA
additionally proposed redesignating
§ 74.13(e) as § 74.13(b), and removing
existing paragraphs (b) through (d), (f)
and (g) as they are no longer relevant.
VA also proposed removing the phrase
‘service-disabled veteran’ as the term
veteran would be used to refer to both
veterans and service-disabled veterans.
VA received one comment that the
reconsideration process saves time and
money. Effective October 1, 2018, in
accordance with the NDAA, the VA post
determination process will be
transferred to SBA OHA. All appeals
will be adjudicated in accordance with
13 CFR part 134. Therefore, VA will not
alter the language of § 74.13 and is
adopting the amendments exactly as
proposed.
K. Section 74.14
VA proposed redesignating § 74.14 as
§ 74.14(a) and to remove references to
requests for reconsideration. VA further
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proposed amending the list of
occurrences that the six-month waiting
period applies before an applicant may
submit a new application. These
occurrences include notices of verified
status cancellation and appeals filed
with OHA that sustain initial denial
letters and verified status cancellations
issued by CVE. VA further proposed
adding a new § 74.14(b) to clarify that a
finding of ineligibility during a
reapplication will result in the
immediate removal of the participant.
VA did not receive any comments on
the proposed amendment to § 74.14 and
is therefore adopting the amendments as
proposed.
L. Section 74.15
VA proposed amending § 74.15(a) by
splitting the paragraph into paragraphs
(a), (b), and (c). VA proposed removing
current § 74.15(b) because it deals with
affiliation and is therefore addressed in
§ 74.5. VA proposed amending newly
designated § 74.15(a) to improve
specificity. VA proposed amending new
designated § 74.15(b) to require
participants to inform CVE within 30
days of changes affecting eligibility. VA
proposed amending redesignated
§ 74.15(c) to include all situations in
which the eligibility period may be
shortened. VA proposed redesignating
(c), (d), and (e) as (d), (e), and (f),
respectively. VA further proposed
amending the redesignated § 74.15(e) to
reference immediate removals pursuant
to § 74.2. VA received one comment that
agrees with the process in § 74.15(b),
requiring firms to inform VA within
thirty days of changes affecting
eligibility, but expressed a concern that
VA should provide guidance on which
changes would affect eligibility, since
most firms would not be aware of which
changes are material. In response, VA
has published guidance on the OSDBU
website. The same guidance which
affects companies applying for the
verification program would likewise
apply to a company seeking to modify
aspects of ownership and control in its
business documents. In addition, VA
has a list of trained verification
counselors, who are available to assist
with issues concerning a company’s
eligibility. VA received another
comment that a company may lose its
eligibility by no longer qualifying as a
small business, but under an existing
award, it remains eligible to perform a
long-term contract. The fear is that the
business would no longer appear as an
eligible concern on the VIP database. In
response, eligibility for a long-term
contract is a contracting issue that
should be managed through the
contracting officer. Verification for the
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VIP database speaks to current
eligibility under existing standards. The
regulations do not contain an exception
for companies performing long-term
contracts. Thus, VA sees no basis in
making additional amendments to the
regulations based on these comments.
As there are no other comments to
§ 74.15(a) through (c) and (e), VA is
adopting the amendments exactly as
proposed.
VA received a comment on § 74.15(d)
that firms should be informed of the
nature and facts against them when VA
initiates a verification examination
upon receipt of credible evidence
concerning its eligibility. In response,
VA informs a participant concerning
issues of eligibility when it initiates
cancellation proceedings. Upon the
issuance of a Notice of Proposed
Cancellation, the concern receives
notice of the nature and specific facts
which VA considers to adversely impact
the firm’s eligibility and is provided an
opportunity to provide a response. VA
received another comment that there
should be an appeals process if a
company is removed from the VIP
database on the grounds of ineligibility
and the company should remain eligible
in the database pending resolution of
the appeal. VA responds that, in the
event a participant is removed as the
result of a verified status cancellation, it
has a right of appeal. Specifically, in
accordance with the NDAA, the VA post
decision process will be transferred to
SBA OHA. All appeals will be
adjudicated in accordance with 13 CFR
part 134. However, the regulation does
not allow concerns to retain their
eligibility during the appeal process.
Upon a finding that a company no
longer qualifies for the VIP database, it
is removed immediately. VA sees no
basis in making any additional
amendments to the regulations based on
these comments. As there are no other
comments on § 74.15(d), VA is adopting
the amendments exactly as proposed.
M. Section 74.20
VA proposed amending the first three
sentences of § 74.20(b). In the first
sentence, VA proposed removing the
phrase ‘‘or parts of the program
examination’’. In the second sentence,
VA proposed changing ‘‘location’’ to
‘‘location(s)’’ and in the third sentence,
VA proposed changing the word
‘‘[e]xaminers’’ to ‘‘CVE’’. As the
proposed revisions to § 74.12 fully
address the required documentation
necessary for verification, VA proposed
removing the list of documents from
§ 74.20. VA did not receive any
comments on the proposed amendment
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to § 74.20 and is therefore adopting the
amendments as proposed.
N. Section 74.21
VA proposed amending § 74.21 to
reorder changes made to other sections
of this part. VA proposed amending
§ 74.21(a) to remove reference to the
‘‘ ‘verified’ status button’’ in order to
reflect the current user interface of the
VIP database. VA proposed amending
§ 74.21(c) by referencing the immediate
removal provisions established in
§ 74.2. VA additionally proposed
redesignating § 74.21(c) as § 74.21(d).
VA received one comment on
§ 74.21(d)(4) that it is redundant and
therefore irrelevant, since it is covered
under § 74.21(d)(1) and (2). In response,
VA agrees with the commenter that
§ 74.21(d)(4) may overlap with
§ 74.21(d)(1) and (2) to some degree.
However, § 74.21(d)(4) contains a
specific control requirement which is
highlighted to ensure clarity. VA
proposed removing § 74.21(c)(5) and (8)
as involuntary exclusions are now
addressed in § 74.2. VA also proposes
redesignating § 74.21(c)(6), (7), and (10)
and (d) as § 74.21(d)(5), (6), and (7) and
(e), respectively. VA proposed adding
§ 74.21(d)(8) to notify the public that
failure to report changed circumstances
within 30 days is good cause to initiate
cancellation proceedings. VA received
one comment that § 74.21(d)(9) should
provide for a cure period prior to the
issuance of a Notice of Proposed
Cancellation and that the regulations
should take into consideration the
varying nature of licenses. In response,
the comment to § 74.21(d)(9) is not the
subject of the proposed change to the
regulation. Additionally, the
cancellation proceedings provide the
concern an opportunity to respond and
refute the proposed bases for
cancellation prior to any adverse action
being taken. As it is each participant’s
obligation to remain eligible for the
program in accordance with the
applicable verification requirements,
and the current procedures contain
procedural safeguards, VA sees no need
to create an additional cure period.
In addition, VA proposed removing
the term ‘‘ ‘verified’ status button’’ to
reflect the current user interface of the
database and adding the phrase ‘‘or its
agents’’ to clarify who may request
documents. VA proposed deleting the
words ‘‘a pattern of’’ to clarify the
requirements necessary to remove a
company for failure to provide
requested information. VA also
proposed removing the term
‘‘application’’ as VA Form 0877 reflects
current program requirements. VA
additionally proposed changing the
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phrase ‘60 days’ to ‘30 days’ to conform
with revised § 74.3(f)(1). Considering
the comments received on § 74.21(d),
VA sees no basis in making any
additional amendments to the
regulations based on these comments.
As there are no other comments on
§ 74.21(d), VA is adopting the
amendments exactly as proposed.
O. Section 74.22
VA proposed amending § 74.22(a) to
note the beginning of the relevant 30day time period as the date on which
CVE sends notice of proposed
cancellation of verified status. VA
additionally proposed to amend
§ 74.22(e) to implement the new appeals
procedure to OHA prescribed in the
NDAA. VA did not receive any
comments on the proposed amendment
to § 74.22 and is therefore adopting the
amendments as proposed.
P. Sections 74.25 and 74.26
VA proposed amending § 74.25 to
replace ‘‘the Department’’ with ‘‘VA’’
and amending § 74.26 to add more
specificity to the regulation concerning
the information to be submitted for
verification. VA received one comment
on the proposed revision to § 74.26
which stated that it needed OMB
authorization. In response, without
more specific information, VA is
unaware of the requirement for
obtaining OMB authorization for § 74.26
other than the ordinary review process.
Moreover, there are no material
amendments to § 74.26 as the language
is merely being refined. Therefore, VA
sees no basis in making any additional
amendments to the regulations based on
the comment. As no other comments to
§§ 74.25 and 74.26 were received, VA is
adopting the amendments exactly as
proposed.
Q. Section 74.27
VA amends § 74.27 to outline
document storage requirements. VA
received one comment on § 74.27 that it
needed OMB authorization. In response,
without more specific information, VA
is unaware of the requirement for
obtaining OMB authorization for the
provisions contained § 74.27 other than
the ordinary review process. Moreover,
the amendment to § 74.27 is not
substantive. There are no material
amendments to § 74.27. VA proposed
amending § 74.27 to reword the first
sentence to specify that all documents
submitted will be stored electronically.
‘‘Vendor Information Pages’’ is changed
to ‘‘CVE’’ and the location reference is
removed. The second sentence is
revised to indicate that owner
information will be compared to
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available records. In addition,
information is added regarding records
management procedures and data
breaches. Therefore, VA sees no basis in
making any additional amendments to
the regulations based on the comment.
As no other comments on the
amendments to § 74.27 were received,
VA is adopting the amendments exactly
as proposed.
R. Sections 74.28 and 74.29
VA proposed amending § 74.28 to
replace ‘Department of Veterans Affairs’
and ‘Center for Veterans Enterprise’
with VA and CVE, respectively and
§ 74.29 to refer to VA’s records
management procedures. VA did not
receive any comments on the proposed
amendments to §§ 74.28 and 74.29 and
is therefore adopting the amendments as
proposed.
Effect of Rulemaking
The Code of Federal Regulations, as
proposed to be revised by this
rulemaking, would represent the
exclusive legal authority on this subject.
No contrary rules or procedures would
be authorized. All VA guidance would
be read to conform with the rule finally
adopted if possible or, if not possible,
such guidance would be superseded.
Justification for the October 1, 2018
Effective Date
The Administrative Procedure Act
(APA) requires that ‘‘publication or
service of a substantive rule shall be
made not less than 30 days before its
effective date, except . . . as otherwise
provided by the agency for good cause
found and published with the rule.’’ 5
U.S.C. 553(d)(3). The purpose of the
APA provision delaying the effective
date of a rule for 30 days after
publication is to provide interested and
affected members of the public
sufficient time to adjust their behavior
before the rule takes effect. For the
reasons set forth below, VA finds that
good cause exists to make this final rule
become effective on October 1, 2018,
less than 30 days after it is published in
the Federal Register.
As noted above, VA and the SBA have
been working together to jointly
implement the provisions of NDAA
2017. In doing so, VA and the SBA
believe a single date on which all of the
changes go into effect is the most
effective path for implementation. VA
and the SBA consider October 1, 2018
to be the best date for implementation
of new unified rules for the programs.
October 1, 2018 is the start of the new
fiscal year, and is therefore the best date
for separation of contract actions
between different sets of regulations.
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Having contract actions applying
different regulations in the same fiscal
year can often lead to confusion among
contracting officials, and program
participants. Procurements conducted
in fiscal year 2018 will generally follow
the old rules, while all new
procurements in fiscal year 2019 will
follow the new jointly developed
regulations which VA believes will lead
to less confusion.
In addition to the joint effort in
implementing these provisions of
NDAA 2017, VA has in a related rule
making process implemented Sections
1932 and 1833 of NDAA 2017. These
sections dealt with the transition of
certain protest and appeal functions
from the VA to SBA’s Office of Hearings
and Appeals. The final rule
implementing those sections also has an
implementation date of October 1, 2018.
83 FR 13626.
VA and SBA believe that a uniform
transition combining the programs
ownership and control requirements is
extremely important. As such, VA
believes that an earlier effective date
that aligns with the new fiscal year for
contracting, and with the other changes
implementing NDAA 2017 is the best
course of action.
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Paperwork Reduction Act
This rule contains no provision
constituting a collection of information
under the Paperwork Reduction Act of
1995 (44 U.S.C. 3501–3521).
Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980
(RFA), 5 U.S.C. 601–612, as amended,
requires Federal agencies to consider
the potential impact of regulations on
small entities during rulemaking. Small
entities include small businesses, small
not-for-profit organizations, and small
governmental jurisdictions. Section 605
of the RFA allows an agency to certify
a rule, in lieu of preparing an analysis,
if the rulemaking is not expected to
have a significant economic impact on
a substantial number of small entities.
This rule making has an average cost
to the small business of $803, and it
would apply only to applying for
verified status in the VIP database. The
regulation merely clarifies and
streamlines the existing rule and adds
no additional burdens or restrictions on
applicants or participants regarding
VA’s VOSB Verification Program. The
overall impact of the rule is of benefit
to small businesses owned by veterans
or service-disabled veterans.
The overall impact of the rule will not
affect small businesses owned and
controlled by veterans and servicedisabled veterans. The rule removes
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ownership and control from 38 CFR part
74 which will be assumed under a
separate set of regulations promulgated
by SBA. The rule also refines and
clarifies process steps and removes post
examination review. Post examination
review will also be assumed under a
separate set of regulations.
Examination of businesses seeking
verification as veteran-owned small
businesses or service-disabled veteranowned small businesses seeking VA set
aside contract opportunities is through
the examination model. The
examination model revises the
verification process by assigning
dedicated case analysts and providing
applicants with additional access to VA
staffers during verification.
From December 2016 through
February 2017, 352 small businesses
that completed the process and received
determination letters participated in a
follow-up survey detailing their costs
and the attribution of the costs. Seventythree (73) percent of participating
businesses had either $0 costs or
responded not applicable; 14 percent
estimated costs between $1 and $1,000;
3 percent responded with a cost
estimate between $1,001 and $2,000; 3
percent responded with a cost estimate
between $2,001 and $3,000; 2 percent
responded with a cost estimate between
$3,001 and $4,000; 2 percent responded
with a cost estimate between $4,001 and
$5,000; and 4 percent responded with a
cost estimate over $5,000. The average
cost of all businesses providing survey
responses was $803 per business. The
largest cost categories were employee
costs, attorney costs, travel/printing,
consultants, and accountants. Currently,
there are 14,560 verified companies in
VA’s database and approximately 2,100
companies with applications in process.
In addition, no comments were received
regarding RFA issues. Therefore, the
Secretary certifies that the adoption of
this proposed rule would not have a
significant economic impact on a
substantial number of small entities as
they are defined in the Regulatory
Flexibility Act. Therefore, under 5
U.S.C. 605(b), this rulemaking is exempt
from the initial and final regulatory
flexibility analysis requirements of
sections 603 and 604.
Executive Orders 12866, 13563, and
13771
Executive Orders 12866 and 13563
direct agencies to assess the costs and
benefits of available regulatory
alternatives and, when regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
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effects, and other advantages,
distributive impacts and equity).
Executive Order 13563 (Improving
Regulation and Regulatory Review)
emphasizes the importance of
quantifying both costs and benefits,
reducing costs, harmonizing rules, and
promoting flexibility. Executive Order
12866 (Regulatory Planning and
Review) defines a ‘‘significant
regulatory action,’’ which requires
review by the Office of Management and
Budget (OMB), as ‘‘any regulatory action
that is likely to result in a rule that may:
(1) Have an annual effect on the
economy of $100 million or more or
adversely affect in a material way the
economy, a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local, or tribal governments or
communities; (2) Create a serious
inconsistency or otherwise interfere
with an action taken or planned by
another agency; (3) Materially alter the
budgetary impact of entitlements,
grants, user fees, or loan programs or the
rights and obligations of recipients
thereof; or (4) Raise novel legal or policy
issues arising out of legal mandates, the
President’s priorities, or the principles
set forth in this Executive Order.’’
The economic, interagency,
budgetary, legal, and policy
implications of this regulatory action
have been examined, and it has been
determined not to be a significant
regulatory action under Executive Order
12866. VA’s impact analysis can be
found as a supporting document at
http://www.regulations.gov, usually
within 48 hours after the rulemaking
document is published. Additionally, a
copy of the rulemaking and its impact
analysis are available on VA’s website at
http://www.va.gov/orpm by following
the link for VA Regulations Published
from FY 2004 through FYTD. This rule
is not an E.O. 13771 regulatory action
because this rule is not significant under
E.O. 12866.
Unfunded Mandates
The Unfunded Mandates Reform Act
of 1995 requires, at 2 U.S.C. 1532, that
agencies prepare an assessment of
anticipated costs and benefits before
issuing any rule that may result in the
expenditure by State, local, and tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
(adjusted annually for inflation) in any
one year. This rule will not have such
effect on State, local, and tribal
governments, or on the private sector.
Catalog of Federal Domestic Assistance
This rule will affect the verification
guidelines of veteran-owned small
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businesses, for which there is no Catalog
of Federal Domestic Assistance program
number.
List of Subjects in 38 CFR Part 74
Administrative practice and
procedure, Affiliation, Appeals,
Application guidelines, Control
requirements, Definitions, Eligibility
requirements, Eligibility term,
Ownership requirements, Procedures for
cancellation, Reapplication, Records
management, Request for
reconsideration, Verification
examination.
Signing Authority
The Secretary of Veterans Affairs
approved this document and authorized
the undersigned to sign and submit the
document to the Office of the Federal
Register for publication electronically as
an official document of the Department
of Veterans Affairs. Robert L. Wilkie,
Secretary, Department of Veterans
Affairs, approved this document on
September 12, 2018, for publication.
Dated: September 12, 2018.
Jeffrey M. Martin,
Impact Analyst, Office of Regulation Policy
& Management, Office of the Secretary,
Department of Veterans Affairs.
For the reasons set forth in the
preamble, we amend 38 CFR part 74 as
follows:
PART 74—VETERANS SMALL
BUSINESS REGULATIONS
1. The authority citation for part 74 is
revised to read as follows:
■
Authority: 38 U.S.C. 501 and 513, unless
otherwise noted.
■
2. Revise § 74.1 to read as follows:
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§ 74.1 What definitions are important for
Vendor Information Pages (VIP) Verification
Program?
For the purpose of this part, the
following definitions apply:
Applicant means a firm applying for
inclusion in the VIP database.
Application days means the time
period from when a veteran registers for
verification to the time of a
determination, excluding any days in
which CVE is waiting for the firm to
submit information or documentation
necessary for the office to continue
processing the application.
Center for Verification and Evaluation
(CVE) is an office within the U.S.
Department of Veterans Affairs (VA) and
is a subdivision of VA’s Office of Small
and Disadvantaged Business Utilization.
CVE receives and reviews all
applications for eligibility under this
part and maintains the VIP database.
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CVE assists VA contracting offices to
identify veteran-owned small businesses
and communicates with the Small
Business Administration (SBA) with
regard to small business status.
Days are calendar days unless
otherwise specified. In computing any
period of time described in this part, the
day from which the period begins to run
is not counted, and when the last day
of the period is a Saturday, Sunday, or
Federal holiday, the period extends to
the next day that is not a Saturday,
Sunday, or Federal holiday. Similarly,
in circumstances where CVE is closed
for all or part of the last day, the period
extends to the next day on which the
agency is open.
Eligible individual means a veteran,
service-disabled veteran, or surviving
spouse, as defined in the United States
Code and the regulation promulgated by
the SBA, currently 13 CFR part 125.
Joint venture is an association of two
or more business concerns for which
purpose they combine their efforts,
property, money, skill, or knowledge in
accordance with 13 CFR part 125. A
joint venture must be comprised of at
least one veteran-owned small business.
For VA contracts, a joint venture must
be in the form of a separate legal entity.
Non-veteran means any individual
who does not claim veteran status, or
upon whose status an applicant or
participant does not rely in qualifying
for the VIP Verification Program
participation.
Office of Small and Disadvantaged
Business Utilization (OSDBU) is the
office within VA that establishes and
monitors small business program goals
at the prime and subcontract levels.
OSDBU works with VA Acquisitions to
ensure the creation and expansion of
small businesses opportunities by
promoting the use of set-aside
contracting vehicles within VA
procurement. OSDBU connects and
enables veterans to gain access to these
Federal procurement opportunities. The
Executive Director, OSDBU, is the VA
liaison with the SBA. Information
copies of correspondence sent to the
SBA seeking a certificate of competency
determination must be concurrently
provided to the Director, OSDBU. Before
appealing a certificate of competency,
the Head of Contracting Activity must
seek concurrence from the Director,
OSDBU.
Participant has the same meaning
given to such term in 13 CFR part 125.
Primary industry classification means
the six-digit North American Industry
Classification System (NAICS) code
designation which best describes the
primary business activity of the
participant. The NAICS code
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designations are described in the NAICS
Manual published by the U.S. Office of
Management and Budget.
Principal place of business means the
business location where the individuals
who manage the concern’s daily
business operations spend most working
hours and where top management’s
current business records are kept. If the
office from which management is
directed and where the current business
records are kept are in different
locations, CVE will determine the
principal place of business for program
purposes.
Register means the initiation of an
application for verification or
reverification by the business owner or
a business representative.
Service-disabled veteran has the same
meaning given to such term in 13 CFR
part 125.
Service-disabled veteran-owned small
business concern (SDVOSB) has the
same meaning given to such term in 13
CFR part 125.
Small business concern (SBC) has the
same meaning given to such term in 13
CFR part 125.
Surviving spouse has the same
meaning given to such term in 13 CFR
part 125.
VA is the U.S. Department of Veterans
Affairs.
Vendor Information Pages (VIP) is a
database of businesses eligible to
participate in VA’s Veteran-owned
Small Business Program. The online
database may be accessed at no charge
via the internet at https://www.va.gov/
osdbu.
Verification eligibility period is a 3year period that begins on the date CVE
issues its approval letter establishing
verified status. The participant must
submit a new application for each
eligibility period to continue eligibility.
Veteran has the same meaning given
to such term in 13 CFR part 125.
Veteran-owned small business
concern (VOSB) has the same meaning
given to such term in 13 CFR part 125.
Veterans Affairs Acquisition
Regulation (VAAR) is the set of rules
that specifically govern requirements
exclusive to VA prime and
subcontracting actions. The VAAR is
chapter 8 of title 48, Code of Federal
Regulations, and supplements the
Federal Acquisition Regulation (FAR),
which contains guidance applicable to
most Federal agencies.
■ 3. Revise § 74.2 to read as follows:
§ 74.2 What are the eligibility requirements
a concern must meet for the VIP Verification
Program?
(a) Ownership and control. A small
business concern must be
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unconditionally owned and controlled
by one or more eligible veterans,
service-disabled veterans or surviving
spouses, have completed the online VIP
database forms, submitted required
supplemental documentation at http://
www.va.gov/osdbu, and have been
examined by VA’s CVE. Such
businesses appear in the VIP database as
‘‘verified’’.
(b) Good character and exclusions in
System for Award Management (SAM).
Individuals having an ownership or
control interest in verified businesses
must have good character. Debarred or
suspended concerns or concerns owned
or controlled by debarred or suspended
persons are ineligible for VIP
Verification. Concerns owned or
controlled by a person(s) who is
currently incarcerated, or on parole or
probation (pursuant to a pre-trial
diversion or following conviction for a
felony or any crime involving business
integrity) are ineligible for VIP
Verification. Concerns owned or
controlled by a person(s) who is
formally convicted of a crime set forth
in 48 CFR 9.406–2(b)(3) are ineligible
for VIP Verification during the
pendency of any subsequent legal
proceedings. If, after verifying a
participant’s eligibility, the person(s)
controlling the participant is found to
lack good character, CVE will
immediately remove the participant
from the VIP database, notwithstanding
the provisions of § 74.22.
(c) False statements. If, during the
processing of an application, CVE
determines, by a preponderance of the
evidence standard, that an applicant has
knowingly submitted false information,
regardless of whether correct
information would cause CVE to deny
the application, and regardless of
whether correct information was given
to CVE in accompanying documents,
CVE will deny the application. If, after
verifying the participant’s eligibility,
CVE discovers that false statements or
information have been submitted by a
firm, CVE will remove the participant
from the VIP database immediately,
notwithstanding the provisions of
§ 74.22. Whenever CVE determines that
the applicant submitted false
information, the matter will be referred
to the VA Office of Inspector General for
review. In addition, CVE will request
that debarment proceedings be initiated
by the Department.
(d) Financial obligations. Neither an
applicant firm nor any of its eligible
individuals that fails to pay significant
financial obligations, including
unresolved tax liens and defaults on
Federal loans or State or other
government assisted financing, owed to
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the federal government, the District of
Columbia or any state, district, or
territorial government of the United
States, is eligible for VIP Verification. If
after verifying the participant’s
eligibility CVE discovers that the
participant no longer satisfies this
requirement, CVE will remove the
participant from the VIP database in
accordance with § 74.22.
(e) Protest Decisions or other negative
findings. Any firm verified in the VIP
database that is found to be ineligible by
a SDVOSB/VOSB status protest decision
will be immediately removed from the
VIP database, notwithstanding the
provisions of § 74.22. Any firm verified
in the VIP database that is found to be
ineligible due to a U.S. Small Business
Administration (SBA) protest decision
or other negative finding may be
immediately removed from the VIP
database, notwithstanding the
provisions of § 74.22. Until such time as
CVE receives official notification that
the firm has proven that it has
successfully overcome the grounds for
the determination, that the decision is
overturned on appeal, or the firm
applies for and receives verified status
from CVE, the firm will not be eligible
to participate in the 38 U.S.C. 8127
program.
(f) System for Award Management
(SAM) registration. All applicants for
VIP Verification must be registered in
SAM at http://www.sam.gov prior to
application submission.
■ 4. Revise § 74.3 to read as follows:
§ 74.3 Who does CVE consider to own a
veteran-owned small business?
(a) Ownership. Ownership is
determined in accordance with 13 CFR
part 125. However, where 13 CFR part
125 is limited to SDVOSBs, CVE applies
the same ownership criteria to firms
seeking verified VOSB status.
(b) Change of ownership. (1) A
participant may remain eligible after a
change in its ownership or business
structure, so long as one or more
veterans own and control it after the
change. The participant must file an
updated VA Form 0877 and supporting
documentation identifying the new
veteran owners or the new business
interest within 30 days of the change.
(2) Any participant that is performing
contracts and desires to substitute one
veteran owner for another shall submit
a proposed novation agreement and
supporting documentation in
accordance with FAR subpart 42.12 to
the contracting officer prior to the
substitution or change of ownership for
approval.
(3) Where the transfer results from the
death or incapacity due to a serious,
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long-term illness or injury of an eligible
principal, prior approval is not required,
but the concern must file an updated
VA Form 0877 with CVE within 60 days
of the change. Existing contracts may be
performed to the end of the instant term.
However, no options may be exercised.
(4) Continued eligibility of the
participant with new ownership
requires that CVE verify that all
eligibility requirements are met by the
concern and the new owners.
■
5. Revise § 74.4 to read as follows:
§ 74.4 Who does CVE consider to control
a veteran-owned small business?
Control is determined in accordance
with 13 CFR part 125. However, where
13 CFR part 125 is limited to SDVOSBs,
CVE applies the same control criteria to
firms seeking verified VOSB status.
■
6. Revise § 74.5 to read as follows:
§ 74.5 How does CVE determine
affiliation?
(a) CVE does not determine affiliation.
Affiliation is determined by the SBA in
accordance with 13 CFR part 121.
(b) Joint ventures may apply for
inclusion in the VIP Verification
Program. To be eligible for inclusion in
the VIP Verification Program, a joint
venture must demonstrate that:
(1) The underlying VOSB upon which
eligibility is based is verified in
accordance with this part; and
(2) The joint venture agreement
complies with the requirements set forth
in 13 CFR part 125 for SDVOSBs.
However, while 13 CFR part 125 is
limited to SDVOSBs, CVE will apply the
same requirements to joint venture firms
seeking verified VOSB status.
■
7. Revise § 74.10 to read as follows:
§ 74.10
filed?
Where must an application be
An application for VIP Verification
status must be electronically filed in the
Vendor Information Pages database
located on the CVE’s Web portal, http://
www.va.gov/osdbu. Guidelines and
forms are located on the Web portal.
Upon receipt of the applicant’s
electronic submission, an
acknowledgment message will be
dispatched to the concern containing
estimated processing time and other
information. Address information for
CVE is also located on the Web portal.
(The Office of Management and Budget has
approved the information collection
requirements in this section under control
number 2900–0675.)
■
8. Revise § 74.11 to read as follows:
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§ 74.11 How does CVE process
applications for VIP Verification Program?
(a) The Director, CVE, is authorized to
approve or deny applications for VIP
Verification. CVE will receive, review,
and examine all VIP Verification
applications. Once an applicant
registers, CVE will contact the applicant
within 30 days to initiate the process. If
CVE is unsuccessful in its attempts to
contact the applicant, the application
will be administratively removed. If
CVE is successful in initiating contact
with the applicant, CVE will advise the
applicant of required documents and
the timeline for submission. If the
applicant would be unable to provide
conforming documentation, the
applicant will be given the option to
withdraw its application. CVE will
process an application for VIP
Verification status within 90 application
days, when practicable, of receipt of a
registration. Incomplete application
packages will not be processed.
(b) CVE, in its sole discretion, may
request clarification of information
relating to eligibility at any time in the
eligibility determination process. CVE
will take into account any clarifications
made by an applicant in response to a
request for such by CVE.
(c) CVE, in its sole discretion, may
request additional documentation at any
time in the eligibility determination
process. Failure to adequately respond
to the documentation request shall
constitute grounds for a denial or
administrative removal.
(d) An applicant’s eligibility will be
based on the totality of circumstances
existing on the date of application,
except where clarification is made
pursuant to paragraph (b) of this section,
additional documentation is submitted
pursuant to paragraph (c) of this section,
as provided in paragraph (e) of this
section or in the case of amended
documentation submitted pursuant to
§ 74.13(a). The applicant bears the
burden to establish its status as a VOSB.
(e) Changed circumstances for an
applicant occurring subsequent to its
application and which affect eligibility
will be considered and may constitute
grounds for denial of the application.
The applicant must inform CVE of any
changed circumstances that could affect
its eligibility for the program (i.e.,
ownership or control changes) during its
application review.
(1) Bankruptcy. Bankruptcy is a
change in circumstance requiring
additional protection for the agency.
Should a VOSB enter into bankruptcy
the participant must:
(i) Inform CVE of the filing event
within 30 days;
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(ii) Specify to CVE whether the
concern has filed Chapter 7, 11, or 13
under U.S. Bankruptcy code; and
(iii) Any participant that is
performing contracts must assure
performance to the contracting officer(s)
prior to any reorganization or change if
necessary including such contracts in
the debtor’s estate and reorganization
plan in the bankruptcy.
(2) [Reserved]
(f) The decision of the Director, CVE,
to approve or deny an application will
be in writing. A decision to deny
verification status will state the specific
reasons for denial and will inform the
applicant of any appeal rights.
(g) If the Director, CVE, approves the
application, the date of the approval
letter is the date of participant
verification for purposes of determining
the participant’s verification eligibility
term.
(h) The decision may be sent by mail,
commercial carrier, facsimile
transmission, or other electronic means.
It is the responsibility of the applicant
to ensure all contact information is
current in the applicant’s profile.
(The Office of Management and Budget has
approved the information collection
requirements in this section under control
number 2900–0675.)
■
9. Revise § 74.12 to read as follows:
§ 74.12 What must a concern submit to
apply for VIP Verification Program?
Each VIP Verification applicant must
submit VA Form 0877 and
supplemental documentation as CVE
requires. All electronic forms are
available on the VIP database web
pages. From the time the applicant
dispatches the VA Form 0877, the
applicant must also retain on file, at the
principal place of business, a complete
copy of all supplemental documentation
required by, and provided to, CVE for
use in verification examinations. The
documentation to be submitted to CVE
includes, but is not limited to: Articles
of Incorporation/Organization; corporate
by-laws or operating agreements;
shareholder agreements; voting records
and voting agreements; trust
agreements; franchise agreements,
organizational, annual, and board/
member meeting records; stock ledgers
and certificates; State-issued Certificates
of Good Standing; contract, lease and
loan agreements; payroll records; bank
account signature cards; financial
statements; Federal personal and
business tax returns for up to 3 years;
and licenses.
(The Office of Management and Budget has
approved the information collection
requirements in this section under control
number 2900–0675.)
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10. Amend § 74.13 by revising the
section heading and paragraphs (a) and
(b) to read as follows
■
§ 74.13 Can an applicant appeal CVE’s
initial decision to deny an application?
(a) An applicant may appeal CVE’s
decision to deny an application by filing
an appeal with the United States Small
Business Administration (SBA) Office of
Hearings and Appeals (OHA) after the
applicant receives the denial in
accordance with 13 CFR part 134. The
filing party bears the risk that the
delivery method chosen will not result
in timely receipt by OHA.
(b) A denial decision that is based on
the failure to meet any veteran
eligibility criteria is not subject to
appeal and is the final decision of CVE.
*
*
*
*
*
■ 11. Revise § 74.14 to read as follows:
§ 74.14 Can an applicant or participant
reapply for admission to the VIP Verification
Program?
(a) Once an application, an appeal of
a denial of an application, or an appeal
of a verified status cancellation has been
denied, or a verified status cancellation
which was not appealed has been
issued, the applicant or participant shall
be required to wait for a period of 6
months before a new application will be
processed by CVE.
(b) Participants may reapply prior to
the termination of their eligibility
period. If a participant is found to be
ineligible, the participant will forfeit
any time remaining on their eligibility
period and will be immediately
removed from the VIP Verification
database. An applicant removed
pursuant to this section may appeal the
decision to OHA in accordance with
§ 74.13. The date of a new
determination letter verifying an
applicant will be the beginning of the
next 3-year eligibility period.
■ 12. Revise § 74.15 to read as follows:
§ 74.15 What length of time may a
business participate in VIP Verification
Program?
(a) A participant receives an eligibility
term of 3 years from the date of CVE’s
approval letter establishing verified
status.
(b) The participant must maintain its
eligibility during its tenure and must
inform CVE of any changes that would
affect its eligibility within 30 days.
(c) The eligibility term may be
shortened by removal pursuant to
§ 74.2, application pursuant to
§ 74.14(b), voluntary withdrawal by the
participant pursuant to § 74.21, or
cancellation pursuant to § 74.22.
(d) CVE may initiate a verification
examination whenever it receives
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credible information concerning a
participant’s eligibility as a VOSB. Upon
its completion of the examination, CVE
will issue a written decision regarding
the continued eligibility status of the
questioned participant.
(e) If CVE finds that the participant
does not qualify as a VOSB, the
procedures at § 74.22 will apply, except
as provided in § 74.2.
(f) If CVE finds that the participant
continues to qualify as a VOSB, the
original eligibility period remains in
effect.
■ 13. Revise § 74.20 to read as follows:
§ 74.20 What is a verification examination
and what will CVE examine?
(a) General. A verification
examination is an investigation by CVE
officials, which verifies the accuracy of
any statement or information provided
as part of the VIP Verification
application process. Thus, examiners
may verify that the concern currently
meets the eligibility requirements, and
that it met such requirements at the time
of its application or its most recent size
recertification. An examination may be
conducted on a random, unannounced
basis, or upon receipt of specific and
credible information alleging that a
participant no longer meets eligibility
requirements.
(b) Scope of examination. CVE may
conduct the examination at one or all of
the participant’s offices or work sites.
CVE will determine the location(s) of
the examination. CVE may review any
information related to the concern’s
eligibility requirements including, but
not limited to, documentation related to
the legal structure, ownership, and
control. Examiners may review any or
all of the organizing documents,
financial documents, and publicly
available information as well as any
information identified in § 74.12.
■ 14. Revise § 74.21 to read as follows:
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§ 74.21 What are the ways a business may
exit VIP Verification Program status?
A participant may:
(a) Voluntarily cancel its status by
submitting a written request to CVE
requesting that the concern be removed
from public listing in the VIP database;
or
(b) Delete its record entirely from the
VIP database; or
(c) CVE may remove a participant
immediately pursuant to § 74.2; or
(d) CVE may remove a participant
from public listing in the VIP database
for good cause upon formal notice to the
participant in accordance with § 74.22.
Examples of good cause include, but are
not limited to, the following:
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(1) Submission of false information in
the participant’s VIP Verification
application.
(2) Failure by the participant to
maintain its eligibility for program
participation.
(3) Failure by the participant for any
reason, including the death of an
individual upon whom eligibility was
based, to maintain ownership,
management, and control by veterans,
service-disabled veterans, or surviving
spouses.
(4) Failure by the concern to disclose
to CVE the extent to which non-veteran
persons or firms participate in the
management of the participant.
(5) Failure to make required
submissions or responses to CVE or its
agents, including a failure to make
available financial statements, requested
tax returns, reports, information
requested by CVE or VA’s Office of
Inspector General, or other requested
information or data within 30 days of
the date of request.
(6) Cessation of the participant’s
business operations.
(7) Failure by the concern to provide
an updated VA Form 0877 within 30
days of any change in ownership, except
as provided in § 74.3(f)(3).
(8) Failure to inform CVE of any such
changed circumstances, as outlined in
paragraphs (c) and (d) of this section.
(9) Failure by the concern to obtain
and keep current any and all required
permits, licenses, and charters,
including suspension or revocation of
any professional license required to
operate the business.
(e) The examples of good cause listed
in paragraph (d) of this section are
intended to be illustrative only. Other
grounds for canceling a participant’s
verified status include any other cause
of so serious or compelling a nature that
it affects the present responsibility of
the participant.
■ 15. Amend § 74.22 by revising
paragraphs (a) and (e) to read as follows:
(e) Appeals. A participant may file an
appeal with OHA concerning the Notice
of Verified Status Cancellation decision
in accordance with 13 CFR part 134.
The decision on the appeal shall be
final.
■ 16. Revise § 74.25 to read as follows:
§ 74.22 What are the procedures for
cancellation?
The records, including those
pertaining to businesses not determined
to be eligible for the program, will be
kept intact and in good condition and
retained in accordance with VA records
management procedures following a
program examination or the date of the
last Notice of Verified Status Approval
letter. Longer retention will not be
required unless a written request is
received from the Government
Accountability Office not later than 30
days prior to the end of the retention
period.
(a) General. When CVE believes that
a participant’s verified status should be
cancelled prior to the expiration of its
eligibility term, CVE will notify the
participant in writing. The Notice of
Proposed Cancellation Letter will set
forth the specific facts and reasons for
CVE’s findings and will notify the
participant that it has 30 days from the
date CVE sent the notice to submit a
written response to CVE explaining why
the proposed ground(s) should not
justify cancellation.
*
*
*
*
*
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§ 74.25 What types of personally
identifiable information will VA collect?
In order to establish owner eligibility,
VA will collect individual names and
Social Security numbers for veterans,
service-disabled veterans, and surviving
spouses who represent themselves as
having ownership interests in a specific
business seeking to obtain verified
status.
■ 17. Revise § 74.26 to read as follows:
§ 74.26 What types of business
information will VA collect?
VA will examine a variety of business
records. See § 74.12, ‘‘What must a
concern submit to apply for VIP
Verification Program?’’
■ 18. Revise § 74.27 to read as follows:
§ 74.27
How will VA store information?
VA stores records provided to CVE
fully electronically on the VA’s secure
servers. CVE personnel will compare
information provided concerning
owners against any available records.
Any records collected in association
with the VIP verification program will
be stored and fully secured in
accordance with all VA records
management procedures. Any data
breaches will be addressed in
accordance with the VA information
security program.
■ 19. Revise § 74.28 to read as follows:
§ 74.28
Who may examine records?
Personnel from VA, CVE, and its
agents, including personnel from the
SBA, may examine records to ascertain
the ownership and control of the
applicant or participant.
■ 20. Revise § 74.29 to read as follows:
§ 74.29
When will VA dispose of records?
[FR Doc. 2018–20639 Filed 9–21–18; 8:45 am]
BILLING CODE 8320–01–P
E:\FR\FM\24SER1.SGM
24SER1

Agencies

[Federal Register Volume 83, Number 185 (Monday, September 24, 2018)]
[Rules and Regulations]
[Pages 48221-48232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20639]
=======================================================================
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 74
RIN 2900-AP97
VA Veteran-Owned Small Business (VOSB) Verification Guidelines
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
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SUMMARY: The Department of Veterans Affairs (VA) is amending its
regulations governing VA's Veteran-Owned Small Business (VOSB)
Verification Program. The National Defense Authorization Act for Fiscal
Year 2017 (``the NDAA''), placed the responsibility for issuing
regulations relating to ownership and control for the verification of
VOSBs with the United States Small Business Administration (SBA). This
regulation implements the NDAA by referencing SBA's regulations
governing ownership and control and adds and clarifies certain terms
and references that are currently part of the verification process. The
NDAA also provides that in certain circumstances a firm can qualify as
VOSB or Service-Disabled Veteran-Owned Small Business (SDVOSB) when
there is a surviving spouse or an employee stock ownership plan (ESOP).
DATES: This rule is effective on October 1, 2018.
FOR FURTHER INFORMATION CONTACT: Tom McGrath, Director, Center for
Verification and Evaluation (00VE), Department of Veterans Affairs, 810
Vermont Ave. NW, Washington, DC 20420, (202) 461-4600. (This is not a
toll-free number.)
SUPPLEMENTARY INFORMATION: In Public Law 114-840, the NDAA designates
the SBA as the Federal Agency responsible for creating regulations
governing ownership and control. This rule amends VA's verification
regulations in order to implement the NDAA as regulations relating to
and clarifying ownership and control are no longer the responsibility
of VA.
On January 10, 2018, VA published in the Federal Register (83 FR
1203) a proposed rule to amend its regulations governing its VOSB
Program. The proposed rule allowed for a comment period ending on March
12, 2018. During the comment period, VA received several comments from
17 commenters.
Summary of Comments and VA's Response
A. General
VA received several comments that described the commenters' views
and experiences without any reference to a proposed regulatory
provision. VA is unable to respond to these comments as they did not
address the proposed provisions at issue here. One commenter questions
the VA's authority with regards to the verification process and
disagrees that the VA is authorized to issue regulations and make
determinations of ownership and control. The commenter contends that
VA's function with respect to verification should be limited to
verifying veteran and disability status, and maintaining the VA list of
verified SDVOSBs and VOSBs. Although the authority to issue regulations
setting forth the ownership and control criteria for SDVOSBs and VOSBs
now rests with the Administrator of the SBA, the Secretary is still
charged with verifying that each applicant complies with those
regulatory provisions prior to granting verified status and including
the applicant in the VA list of verified firms. As the Secretary still
maintains this authority and responsibility, VA finds the commenter's
proposed limitation without merit. However, to eliminate any confusion
as to whether the Secretary is attempting to regulate ownership and
control requirements, VA will refer directly to SBA's regulations where
appropriate. This will additionally allow VA's regulation to be
immediately updated should SBA make regulatory changes related to
ownership and control. Several other commenters discussed their
personal difficulties with the verification process, how regulatory
provisions are interpreted, and the manner by which the verification
process is administered. As these comments do not address the proposed
regulation, VA is unable to respond to these comments.
B. Section 74.1
For consistency, Sec. 74.1 proposed removing all references to
VetBiz and replacing the words Center for Verification and Evaluation,
service-disabled veteran-owned small business, the Department of
Veterans Affairs, Vendor Information Pages, and veteran-owned small
business, and uses in their place the respective abbreviations--CVE,
SDVOSB, VA, VIP, and VOSB in titles and the body of the regulation,
[[Page 48222]]
respectively. VA received no comments on this proposed change and is
therefore adopting the abbreviations exactly as proposed. As these
abbreviations are used through the proposed amendments, all such
abbreviations as they appear will be adopted as proposed.
VA proposed amending Sec. 74.1, which sets forth definitions
important to the Vendor Information Pages (VIP) Verification Program,
to remove six (6) definitions from Sec. 74.1 that relate to and
clarify ownership and control. Specifically, VA proposed removing the
following definitions: day-to-day management, day-to-day operations,
immediate family member, negative control, same or similar line of
business, and unconditional ownership. VA proposed deleting one
additional definition, Vet.Biz.gov, to account for changes to the
location of the Vendor Information Pages (VIP) database. VA did not
receive any comments on these proposed removals and is therefore
adopting these removals as proposed.
VA additionally proposed amending Sec. 74.1 to add three new
definitions. Specifically, VA proposed to add a definition for
``applicant'' in order to clarify the use of the term throughout the
regulation, a new definition ``application days'' in order to clarify
how the time period in Sec. 74.11(a) is computed, and a definition
http://www.va.gov/osdbu is added to identify the hosting website as VA
is replacing VetBiz.gov as the host of the VIP database. VA did not
receive any comments regarding the new definition http://www.va.gov/osdbu. Therefore, VA is adopting that definition exactly as proposed.
VA received one comment regarding the new definition ``applicant'' that
it should be renamed participant since it is a benefit Veterans earn.
In response, the definition of applicant refers to a business concern
that applies for verified status, but has not yet completed the process
and received an approval letter from CVE. Additionally, the regulations
already set forth a unique definition for participant. Therefore, VA is
not changing the definition of `applicant' and will adopt the
definition as proposed. VA received one comment on the proposed
definition for ``application days''. The comment requested additional
clarity as to the period that would be counted as `application days'.
Though not in direct response to the definition of application days, VA
received additional comments concerning when the 90-day application
period begins. In response to these comments, VA agrees that additional
clarification is needed. Accordingly, the commenters' recommendations
are accepted in part and VA is further revising the language of Sec.
74.1 to add a new definition ``register'' to clarify when the 90-day
application period begins to run.
VA additionally proposed amending Sec. 74.1 the following sixteen
(16) definitions: Center for Veterans Enterprise, joint venture, Office
of Small and Disadvantaged Business Utilization, non-veteran,
participant, primary industry classification, principal place of
business, service-disabled veteran, service-disabled veteran-owned
small business, small business concern, surviving spouse, vendor
information pages, verification eligibility period, veteran, veterans
affairs acquisition regulation, and veteran-owned small business.
VA received no comments on the proposed changes to the following
four definitions: Center for Veterans Enterprise, non-veteran, vendor
information pages, and Veterans Affairs acquisition regulation.
Therefore, VA is adopting those definitions exactly as proposed.
VA did not receive any specific comments on the definitions
participant and small business concern. However, the NDAA has removed
the responsibility of issuing regulations governing ownership and
control from VA and transferred the responsibility to the SBA. The SBA
has issued proposed regulations governing ownership and control which
includes definitions for participant and small business concern. To
eliminate any confusion, VA will refer directly to SBA's regulations
when defining the terms participant and small business concern.
VA proposed amending the definition joint venture to conform to the
amendments to 13 CFR part 125. VA received several comments from one
commenter regarding this proposed change. The commenter expressed
support of VA's proposed definition, but expressed concern it would
lead to VA and SBA having conflicting rules on the definition of joint
venture. This concern appears to be based on an assumption that VA will
not apply the applicable joint venture requirements, and exceptions,
found in SBA's regulations. However, this is not the case. Proposed
Sec. 74.5 would provide further guidance on joint ventures and refers
to SBA's regulations directly. Accordingly, VA and SBA will treat joint
ventures the same way. Though the commenter expressed concern that the
SBA's regulations would, in certain circumstances, allow a large
business to partner with a small business, the NDAA requires that VA
and SBA create uniform eligibility criteria for SDVOSB firms, which
includes those firms structured as joint ventures. Accordingly, VA will
not alter the definition of joint venture and is adopting it exactly as
proposed. VA proposed amending the definition of Office of Small and
Disadvantaged Business Utilization to more accurately reflect the role
fulfilled by this office with respect to VOSB matters. The definition
included a provision stating that ``[t]he Executive Director, OSDBU, is
the VA liaison with the SBA. Information copies of correspondence sent
to the SBA seeking a certificate of competency determination must be
concurrently provided to the Director, OSDBU.'' VA received one comment
that authorizations regarding certificates of competency should be
removed or addressed as part of the VAAR. Though certificates of
competency do relate to contracting matters, VA sought to create a
definition that fully describes that functions of the Office of Small
and Disadvantaged Business Utilization. In addition, due to the
overlapping nature of the verification and acquisition programs, there
will be occasions where the regulation speaks to issues relating to
contracting as well as verification. Accordingly, VA will not alter the
definition of Office of Small and Disadvantaged Business Utilization
and is adopting it exactly as proposed. VA proposed amending the
definition of primary industry classification to make a technical
change to use the acronym NAICS as it has already been defined in a
parenthetical earlier in the definition. VA received two comments on
the definition primary industry classification. Both commenters stated
the definition was unnecessary. VA responds that this definition was
not a new addition, and the only proposed change was to make a
technical change to utilize the acronym `NAICS'. Moreover, VA believes
the definition is warranted as firms list their business type and
associated NAICS codes on the firm's business profile. Therefore, VA
will not make any changes to this definition and is adopting it exactly
as proposed.
VA proposed amending the definition of principal place of business
to change day-to-day operations to daily business operations in order
to match the wording in 13 CFR 125.13. VA received two comments to the
definition principal place of business. Specifically, one commenter
sought to expand the definition to refer not only to day-to-day
operations but long-term operations as well. Another commenter
questioned the need for the definition. VA responds that the proposed
change was intended
[[Page 48223]]
to create uniformity between the VA and SBA regulations as SBA is now
responsible for issuing regulations governing the ownership and control
requirements for SDVOSBs. Accordingly, the commenter's proposed
expansion is outside of VA's authority to regulate and therefore VA is
adopting the definition exactly as proposed.
VA proposed to amend the definitions for service-disabled veteran,
service-disabled veteran owned small business, surviving spouse,
veteran, and veteran owned small business to align with SBA's proposed
definitions for these terms. Initially, VA proposed to amend these
definitions by incorporating the exact language contained in the NDAA
and utilized by SBA in its proposed rule. VA received numerous comments
on the proposed revisions. One commenter expressed concern that SBA's
definitions did not provide sufficient guidance. Several commenters
requested that VA include clarifying language when referencing ESOPs
within the definitions. Two other commenters requested VA clarify the
term ``permanent and severe'' disability as used in the definitions.
Numerous commenters recommended additional revisions to the proposed
definition for surviving spouse, primarily requesting the VA expand the
eligibility criteria for individuals attempting to qualify as a
surviving spouse. VA responds that the NDAA transferred the authority
from VA to the SBA to make such substantive changes to definitions that
impact ownership and control of SDVOSBs. Rather, VA's charge is
verifying that firms meet the ownership and control requirements
promulgated by SBA. Accordingly, VA finds the revisions suggested by
the commenters are outside the scope of the proposed rule. However, VA
acknowledges the potential that SBA may in the future amend these
regulatory requirements, either as a result of statutory changes or on
its own. To account for these potential changes, and eliminate any
confusion as to whether VA is attempting to create unique definitions,
VA will alter the language of the above definitions to explicitly state
the terms will have the same meaning as set forth in SBA's regulations.
VA proposed amending the definition of verification eligibility
period to reflect the current eligibility period of 3 years, which was
effectuated via publication in the Federal Register on July 12, 2017 at
82 FR 32137. VA received one comment regarding this proposed change.
The commenter expressed concern that the eligibility period subjects
verified concerns to onerous and expensive re-certifications. VA
responds that the proposed change is only a technical change to align
the definition with the actual eligibility period that was made
effective in a final rule published in the Federal Register on July 12,
2017 (82 FR 32137), which amended Sec. 74.15 to reflect the current
three-year eligibility period. Therefore, VA will not alter the
language of the definition and is adopting it exactly as proposed.
C. Section 74.2
VA proposed amending Sec. 74.2(a) to add the clause ``submitted
required supplemental documentation at http://www.va.gov/osdbu'' to
clearly explain the key steps necessary to submit an application and
obtain verification. VA received one comment that the proposed
additional language referencing ``required supplemental documentation''
is unnecessary. The provision providing for submitting supplemental
documentation is not a new concept to the regulation. It is a
recognized method for verifying applicants and was previously described
in Sec. 74.11. As the amendment is merely reordering the regulation to
provide more clarity and the comment does not propose a substantive
change, VA will adopt the language of Sec. 74.2(a) exactly as
proposed.
VA proposed amending Sec. 74.2(b) to amend the title to reference
the System for Award Management, to address the impact of criminal
activity on eligibility, to grant the VA authority to exclude all
principals of the concern, and to specify that the debarment of any
individual will impact the concern's eligibility. VA received one
general comment on all circumstances where there is an immediate
removal and that any such removal should have an appeals process where
no final action should not be taken until the appeal is resolved. VA
additionally received several comments on Sec. 74.2(b). One comment is
that there are sufficient legal certifications, statutes and remedies
that would render offerors ineligible. A second is that the terms are
ambiguous and invite arbitrary and capricious judgement that can lead
to denial of due process. Another commenter suggested that the
definition be revised to be brought in line with the requirements for
the SBA's 8(a) Program, to provide for reviewing criminal violations on
a case-by-case basis. In response, the amendments to Sec. 74.2(b),
currently titled ``good character'' are merely to provide clarity to
circumstances under which a company is currently subject to removal on
the grounds of good character as opposed to cancellation. Persons found
guilty of, or found to be involved in criminally related matters or
debarment proceedings have received due process through whatever
administrative or criminal proceeding giving rise to the removal. VA is
not an additional level of review, but merely acting on determinations
issued by courts or other administrative bodies or processes.
Additionally, VA has mirrored the causes for immediate removal on those
set forth in FAR 9.4, which sets forth means by which concerns can be
deemed ineligible to receive any federal contract. The concept of
immediate removal has been an integral component of Sec. 74.2 since
2010. It has been used as a streamlined method of removing companies
found ineligible for VA's set aside procurement program. In both 2010
and 2012, GAO published reports tasking VA with reducing potential
instances of fraud and abuse. VA has found in its administration of the
verification program that the use of the procedures identified in Sec.
74.2 protects VA acquisition integrity and diminishes ongoing exposure
to fraud, waste, and abuse. The United States Court of Federal Claims
in the case of Veterans Contracting Group, Inc., v. United States, No.
17-1015C, pg. 10 (Dec. 21, 2017) recognizes that immediate removal does
not necessarily trigger a loss of due process protections. Finally, all
examinations of business entities, concerning issues of criminality or
otherwise, are conducted on a case-by-case basis and take into account
all relevant facts. Amending the regulation to further mirror the SBA's
8(a) program regulations is unnecessary. As VA views the proposed
amendments as merely adding clarity to the current process and that no
other comments have been received on the other amendments to Sec.
74.2(b), VA adopts the amendments exactly as proposed.
VA proposed amending Sec. 74.2(c) by adding the phrase ``false
statements or information'' to reference the title and to provide
further clarification on eligibility requirements. VA additionally
proposed amending Sec. 74.2(c) to clarify that removal is immediate
and to remove the word ``the'' before CVE in the last sentence of the
section. One commenter supports the amendment stating that submitting
false statements should be stringently enforced. VA received a comment
that submitting false statements is a felony and that an independent VA
determination that a company made false statements can lead to denial
of due process. VA received another comment that a determination by CVE
as to whether false statements exists is redundant, ambiguous, could be
[[Page 48224]]
subjectively arbitrary, and is not authorized. In response, the
amendments to Sec. 74.2(c) are intended to clarify current
interpretation and policy. The current language of Sec. 74.2(c) has
always been interpreted to allow for immediate removal upon a
determination that a concern knowingly submitted false information. The
proposed amendment adds the word immediate to remove any ambiguity.
With respect to potential due process issues, VA offers the response
provided in VA's response to comments made to Sec. 74.2(b). As VA
views the proposed amendments as merely adding clarity to the current
process and that no other comments have been received on the other
amendments to Sec. 74.2(c), VA adopts the amendments as proposed.
VA proposed amending Sec. 74.2(d) by including tax liens and
unresolved debts owed to governmental entities outside of the Federal
government as disqualifying an applicant. VA also proposed amending the
title of the section to remove the word federal to reflect that both
federal and local obligations may disqualify an applicant and to
provide that participants that no longer qualify under Sec. 74.2(d)
will be removed in accordance with Sec. 74.22. VA received one comment
that expanding unresolved debts owed to government entities outside the
Federal government is overreaching and outside the expertise of the VA.
VA received another comment that including outstanding obligations of
all state and local jurisdictions where a company does business is
impractical, invites arbitrary and capricious determinations and can
lead to a denial of due process. VA received two additional comments
that the proposed language could potentially disqualify both a business
entity that has either a legitimate tax dispute or a business entity
that entered into a payment plan. Including unresolved debts owed to
state and local governmental units is an appropriate amendment to the
regulation considering the significant governmental benefits that a
verified concern may become eligible. Furthermore, failure to qualify
on the grounds of outstanding financial obligations is not an immediate
disqualifying event which may trigger due process considerations.
Specifically, in accordance with Sec. 74.22, a business concern may
provide any explanation deemed appropriate to explain the circumstances
of any outstanding financial obligation, regardless of the
jurisdiction. Thus, so long as the business entity provides an adequate
response to a cancellation proceeding, the business will not be removed
from the VIP database. VA does not find that expanding the regulation
to include unresolved debts owed to state and local governmental units
as overly burdensome or that there is a potential due process
violation. Therefore, as there are no other comments, VA is adopting
Sec. 74.2(d) as proposed.
VA proposed amending Sec. 74.2(e) to clarify the consequences of
SBA protest decisions and other negative findings and to amend the
title of the section. VA received one comment that supports immediate
removal on the basis of negative findings, but recommends that more
examples should be provided because it is otherwise overly broad. VA
received a second comment that there should be a clear process to
determine ineligibility including during an appeal to prevent due
process violations. VA received another comment that there is clear law
and regulation on the ramifications of SBA protests decisions and
negative findings. The proposed amendments to Sec. 74.2(e) merely seek
to clarify CVE's current process and to confirm that SBA decisions and
other negative finding are subject to immediate removal as opposed to
cancellation. Other than reordering the language and clarifying the
treatment of status protests and other negative findings, Sec. 74.2(e)
does not propose any substantive changes. Treatment of negative
findings is not a new concept in the regulation rather the proposed
change is written to encompass all negative findings, regardless of
origin. In addition, as immediate removal is not a new concept, the
proposed change does not implicate any new due process issues.
Moreover, the potential negative determinations would be the result of
a proceeding in which the aggrieved party would have been given notice
and an opportunity to be heard. As VA views the proposed amendments as
merely adding clarity to the current process and that no other comments
have been received on the other remaining amendments to Sec. 74.2(e),
VA adopts the amendments as proposed.
VA proposed amending Sec. 74.2 to include paragraph (f) that
specifically requires that all applicants for VIP verification must be
registered in the System for Award Management (SAM). As VA did not
receive any comments on this change, VA adopts the amendment as
proposed.
D. Section 74.3
VA proposed amending Sec. 74.3 to reflect that ownership is to be
determined in accordance with 13 CFR part 125 as the result of the
requirements outlined in the NDAA. To put into effect this legislative
change, VA proposed amending Sec. 74.3(e) to redesignate it as Sec.
74.3(b) to account for the removal of paragraphs (a)-(d). As VA did not
receive any comments on this change, VA adopts the amendment as
proposed.
VA proposed amending Sec. 74.3(b)(1) and (3) by a technical change
to replace ``application'' with ``VA Form 0877'' in order to clarify
the requirement and conform language to the rest of the regulation. VA
also proposed amending Sec. 74.3(b)(1) to add a 30-day time period for
submission of a new application after a change in ownership. This time
period provides CVE the ability to definitively and accurately track
changes of ownership. VA received one comment that recommends that the
time a business should notify VA of a change in ownership should be
clarified to begin on the date the concern finalizes the change within
the business's corporate documents. VA understands the comment, but
further clarification would not change the basic notification
requirement. A business organization should provide notice of a change
at the time is occurs. VA received additional comments on Sec. 74.3
recommending that Sec. 74.3(b)(2) and (3) be removed and addressed in
the VAAR as these provisions relate to functions of contracting
officers. In response, the amendment to Sec. 74.3(b)(2) is merely a
renumber of an existing regulation with no change in content.
Additionally, while this provision may also implicate contracting
issues, VA believes it is important for applicant firms to understand
how future changes can impact eligibility. Similarly, Sec. 74.3(b)(3)
is nearly identical to the prior provision except for a technical
change that indicates that a new application is filed with VA and not
the contracting officer. VA sees no basis in making any additional
amendments to the regulations based on the comments. As no other
comments on the remaining proposed amendments to Sec. 74.3(b) were
received, VA is adopting the amendments exactly as proposed.
E. Section 74.4
VA proposed amending Sec. 74.4(a) to state that control is
determined in accordance with 13 CFR part 125 pursuant to the NDAA. VA
also proposed removing paragraphs (b) through (i) upon that same basis.
Although VA did not expressly note that it was removing the designation
for paragraph (a), since there will not be any other paragraphs, VA
proposes removing the designation for paragraph (a), as it is
unnecessary. VA did not
[[Page 48225]]
receive any comments on the proposed amendment to Sec. 74.4 other than
as previously discussed. Therefore, VA is adopting the amendments as
proposed.
F. Section 74.5
VA proposed amending Sec. 74.5 to include joint ventures. The
section is additionally reworded to clearly establish that 38 CFR part
74 does not supersede 13 CFR part 121 with respect to size
determinations. VA adds paragraph (b) to specifically address
eligibility of joint ventures. Paragraphs (b)(1) and (2) are added to
provide notice of applicable requirements outlined elsewhere in VA
regulation. VA did not receive any comments on the proposed amendment
to Sec. 74.5 other than as previously discussed and is therefore
adopting the amendment as proposed.
G. Section 74.10
VA proposed amending Sec. 74.10 to remove reference to the
physical address for CVE so to allow address changes without the need
for an amendment to the regulation. VA did not receive any comments on
the proposed amendment to Sec. 74.10 and is therefore adopting the
amendment as proposed.
H. Section 74.11
VA proposed amending Sec. 74.11(a) to outline its new application
processing procedures and various editorial non-substantive conforming
changes. Additionally, VA proposed amending Sec. 74.11(a) to
incorporate the term `application days' and to increase the application
processing time to 90 application days, when practicable. VA received
comments that expressed a concern that the term registration as
referenced in Sec. 74.11(a) is unclear. VA provided a response above
which addresses this concern. Specifically, VA agrees that that the
regulation could be clearer, and has included a definition for the term
register. VA believes the additional definition adequately addresses
the commenter's concerns, and therefore does not find any additional
revision to Sec. 74.11(a) to be necessary. VA proposed adding a new
Sec. 74.11(c) to address instances where CVE does not receive all
requested documentation. In order to comply with VA's statutory charge
to verify applicants for the VIP database, VA requires documentation to
demonstrate eligibility. VA received comments on Sec. 74.11(a) and
(c), respectively, that subjectivity should be removed from the meaning
of ``conforming documentation'' and the meaning of ``to adequately
respond.'' In response, there is no one requirement for conforming
documentation or providing adequate responses. Conforming documents are
documents that respond to a specific request. Adequate responses are
responses that provide answers to a specific inquiry. For example, if a
request is to provide the last three years' business income tax returns
and only one year is provided, without providing the other two years or
a letter of explanation, conforming documents have not been provided.
It can also be said that the response was not adequate. VA sees no
basis in making any additional amendments to the regulations based on
the comments. As no other comments on the remaining proposed amendments
to Sec. 74.11(a) and (c) were received, VA is adopting the amendments
exactly as proposed.
VA proposed redesignating Sec. 74.11(c) as Sec. 74.11(d) and
adding the term ``totality of circumstances'' as the standard of review
for reviewing an applicant's eligibility. VA also proposed amending
Sec. 74.11(d) by referencing Sec. Sec. 74.11(b) and (c) and 74.13(a)
as exceptions to the totality of circumstances standard and to state
that the burden of establishing VOSB status is on the applicant. VA
received one comment on Sec. 74.11(d) but it was mislabeled and should
have been a comment to Sec. 74.11(h). As VA did not receive any
comments on the proposed amendment to Sec. 74.11(d), VA is therefore
adopting the amendment as proposed.
VA proposed redesignating Sec. 74.11(d) as Sec. 74.11(e) and
proposed amending the first and second sentences by removing the word
``adversely.'' VA also proposed removing the third sentence as it
refers to withdrawal or removal of verified status. This scenario is
addressed in Sec. 74.21 in cancellations, which specifically outlines
participants can exit the VIP database. This proposed removal helps to
eliminate redundancy and reduce the likelihood of confusion. VA also
proposed adding new Sec. 74.11(e)(1) to specifically address
bankruptcy as a changed circumstance. As VA did not receive any
comments on the proposed amendments to Sec. 74.11(e), VA is therefore
adopting the amendments as proposed.
VA proposed redesignating Sec. 74.11(e) as Sec. 74.11(f). Section
74.11(f) outlines the CVE Director's options in issuing determination
letters. VA received one comment on Sec. 74.11(f) that voluntary
withdrawals should be included as a third decision option. In response,
other than redesignating the section numbering, Sec. 74.11(f) does not
propose any substantive changes. Furthermore, Sec. 74.11(f) only
speaks to decisions by CVE. As a withdrawal would be the choice of the
applicant, made available to applicants prior to a formal adverse
decision being issued by CVE, VA does not believe it should be
addressed in this subsection. As Sec. 74.11(f) is only meant to speak
to final determinations, no revisions will be made to Sec. 74.11(f).
VA is therefore adopting the amendments as proposed.
VA proposed redesignating Sec. 74.11(f) and (g) as Sec. 74.11(g)
and (h), respectively. Section 74.11(h) outlines the methods for
delivering determination letters. VA also proposed amending Sec.
74.11(h) to add a second sentence requiring firms to update their
contact information. VA received one comment on Sec. 74.11(h) that VA
should remove all reference to alternative means of transmitting
decisions since the VA only uses electronic mail. In response, while is
it true that VA routinely transmits decisions by email, alternate
delivery options are always available and might be necessary to account
for unforeseen circumstances. As no additional comments on the
remaining proposed amendments to Sec. 74.11(g) and (h) were received,
VA is adopting the amendments exactly as proposed.
I. Section 74.12
VA proposed amending Sec. 74.12 to expand the list of required
documentation routinely requested by CVE. This list includes documents
previously referenced in Sec. 74.20(b). VA additionally proposed
amending Sec. 74.12 so that the term ``electronic form'' would be
changed to ``VA Form 0877'' and the term ``attachments'' would be
changed to ``supplemental documentation.'' VA also proposed amending
Sec. 74.12 by removing the last two sentences in the section. VA
received several comments on the proposed revisions to Sec. 74.12.
However, none of the comments spoke to the proposed amendments. One
comment questioned the need for the terms ``principal place of
business'' and ``primary place of business'' in Sec. 74.12. In
response, the term ``principal place of business'' is used to identify
the place where a complete copy of all supplemental documentation used
in verification examinations is to be retained. The term ``primary
place of business'' is not used in Sec. 74.12. Another comment is that
the required documents outlined in Sec. 74.12 are not required for
every set of circumstances and that the regulations do not provide for
exceptions for unavailable or irrelevant documents. In response, VA
understands that not all documents are available or required for every
business
[[Page 48226]]
structure. In such cases, VA accepts letters of explanation. If the
explanation reasonably explains the unavailability of the document or
information, the document will not be required. For example, if a
corporation does not have an operating agreement and an explanation is
provided that operating agreements are not required for corporations,
VA would accept that explanation. One commenter suggested that there
should be an appeal process when an applicant believes that the
document request is overreaching. In response, VA states that there is
an appeals process. However, the process relates to final
determinations made by CVE. Ultimately, a firm bears the burden of
demonstrating eligibility with the verification requirements. If CVE
does not receive sufficient documentation to allow the office to
conclude the firm satisfies the verification requirements, it will deny
the concern verified status. In accordance with the NDAA, appeals are
to be filed with SBA's Office of Hearings and Appeals (OHA) in
accordance with 13 CFR part 134. VA sees no basis to make any
additional amendments or adjustments to the regulations based on the
comments to Sec. 74.12. Accordingly, VA is adopting the amendments
exactly as proposed.
J. Section 74.13
VA proposed amending Sec. 74.13 to modify the title and to remove
references to the reconsideration process. In accordance with the NDAA,
appeals of initial denials on the grounds of ownership and control will
be adjudicated by SBA OHA. VA additionally proposed amending Sec.
74.13(a) to refer to the appeal process set forth in 13 CFR part 134.
VA additionally proposed redesignating Sec. 74.13(e) as Sec.
74.13(b), and removing existing paragraphs (b) through (d), (f) and (g)
as they are no longer relevant. VA also proposed removing the phrase
`service-disabled veteran' as the term veteran would be used to refer
to both veterans and service-disabled veterans. VA received one comment
that the reconsideration process saves time and money. Effective
October 1, 2018, in accordance with the NDAA, the VA post determination
process will be transferred to SBA OHA. All appeals will be adjudicated
in accordance with 13 CFR part 134. Therefore, VA will not alter the
language of Sec. 74.13 and is adopting the amendments exactly as
proposed.
K. Section 74.14
VA proposed redesignating Sec. 74.14 as Sec. 74.14(a) and to
remove references to requests for reconsideration. VA further proposed
amending the list of occurrences that the six-month waiting period
applies before an applicant may submit a new application. These
occurrences include notices of verified status cancellation and appeals
filed with OHA that sustain initial denial letters and verified status
cancellations issued by CVE. VA further proposed adding a new Sec.
74.14(b) to clarify that a finding of ineligibility during a
reapplication will result in the immediate removal of the participant.
VA did not receive any comments on the proposed amendment to Sec.
74.14 and is therefore adopting the amendments as proposed.
L. Section 74.15
VA proposed amending Sec. 74.15(a) by splitting the paragraph into
paragraphs (a), (b), and (c). VA proposed removing current Sec.
74.15(b) because it deals with affiliation and is therefore addressed
in Sec. 74.5. VA proposed amending newly designated Sec. 74.15(a) to
improve specificity. VA proposed amending new designated Sec. 74.15(b)
to require participants to inform CVE within 30 days of changes
affecting eligibility. VA proposed amending redesignated Sec. 74.15(c)
to include all situations in which the eligibility period may be
shortened. VA proposed redesignating (c), (d), and (e) as (d), (e), and
(f), respectively. VA further proposed amending the redesignated Sec.
74.15(e) to reference immediate removals pursuant to Sec. 74.2. VA
received one comment that agrees with the process in Sec. 74.15(b),
requiring firms to inform VA within thirty days of changes affecting
eligibility, but expressed a concern that VA should provide guidance on
which changes would affect eligibility, since most firms would not be
aware of which changes are material. In response, VA has published
guidance on the OSDBU website. The same guidance which affects
companies applying for the verification program would likewise apply to
a company seeking to modify aspects of ownership and control in its
business documents. In addition, VA has a list of trained verification
counselors, who are available to assist with issues concerning a
company's eligibility. VA received another comment that a company may
lose its eligibility by no longer qualifying as a small business, but
under an existing award, it remains eligible to perform a long-term
contract. The fear is that the business would no longer appear as an
eligible concern on the VIP database. In response, eligibility for a
long-term contract is a contracting issue that should be managed
through the contracting officer. Verification for the VIP database
speaks to current eligibility under existing standards. The regulations
do not contain an exception for companies performing long-term
contracts. Thus, VA sees no basis in making additional amendments to
the regulations based on these comments. As there are no other comments
to Sec. 74.15(a) through (c) and (e), VA is adopting the amendments
exactly as proposed.
VA received a comment on Sec. 74.15(d) that firms should be
informed of the nature and facts against them when VA initiates a
verification examination upon receipt of credible evidence concerning
its eligibility. In response, VA informs a participant concerning
issues of eligibility when it initiates cancellation proceedings. Upon
the issuance of a Notice of Proposed Cancellation, the concern receives
notice of the nature and specific facts which VA considers to adversely
impact the firm's eligibility and is provided an opportunity to provide
a response. VA received another comment that there should be an appeals
process if a company is removed from the VIP database on the grounds of
ineligibility and the company should remain eligible in the database
pending resolution of the appeal. VA responds that, in the event a
participant is removed as the result of a verified status cancellation,
it has a right of appeal. Specifically, in accordance with the NDAA,
the VA post decision process will be transferred to SBA OHA. All
appeals will be adjudicated in accordance with 13 CFR part 134.
However, the regulation does not allow concerns to retain their
eligibility during the appeal process. Upon a finding that a company no
longer qualifies for the VIP database, it is removed immediately. VA
sees no basis in making any additional amendments to the regulations
based on these comments. As there are no other comments on Sec.
74.15(d), VA is adopting the amendments exactly as proposed.
M. Section 74.20
VA proposed amending the first three sentences of Sec. 74.20(b).
In the first sentence, VA proposed removing the phrase ``or parts of
the program examination''. In the second sentence, VA proposed changing
``location'' to ``location(s)'' and in the third sentence, VA proposed
changing the word ``[e]xaminers'' to ``CVE''. As the proposed revisions
to Sec. 74.12 fully address the required documentation necessary for
verification, VA proposed removing the list of documents from Sec.
74.20. VA did not receive any comments on the proposed amendment
[[Page 48227]]
to Sec. 74.20 and is therefore adopting the amendments as proposed.
N. Section 74.21
VA proposed amending Sec. 74.21 to reorder changes made to other
sections of this part. VA proposed amending Sec. 74.21(a) to remove
reference to the `` `verified' status button'' in order to reflect the
current user interface of the VIP database. VA proposed amending Sec.
74.21(c) by referencing the immediate removal provisions established in
Sec. 74.2. VA additionally proposed redesignating Sec. 74.21(c) as
Sec. 74.21(d). VA received one comment on Sec. 74.21(d)(4) that it is
redundant and therefore irrelevant, since it is covered under Sec.
74.21(d)(1) and (2). In response, VA agrees with the commenter that
Sec. 74.21(d)(4) may overlap with Sec. 74.21(d)(1) and (2) to some
degree. However, Sec. 74.21(d)(4) contains a specific control
requirement which is highlighted to ensure clarity. VA proposed
removing Sec. 74.21(c)(5) and (8) as involuntary exclusions are now
addressed in Sec. 74.2. VA also proposes redesignating Sec.
74.21(c)(6), (7), and (10) and (d) as Sec. 74.21(d)(5), (6), and (7)
and (e), respectively. VA proposed adding Sec. 74.21(d)(8) to notify
the public that failure to report changed circumstances within 30 days
is good cause to initiate cancellation proceedings. VA received one
comment that Sec. 74.21(d)(9) should provide for a cure period prior
to the issuance of a Notice of Proposed Cancellation and that the
regulations should take into consideration the varying nature of
licenses. In response, the comment to Sec. 74.21(d)(9) is not the
subject of the proposed change to the regulation. Additionally, the
cancellation proceedings provide the concern an opportunity to respond
and refute the proposed bases for cancellation prior to any adverse
action being taken. As it is each participant's obligation to remain
eligible for the program in accordance with the applicable verification
requirements, and the current procedures contain procedural safeguards,
VA sees no need to create an additional cure period.
In addition, VA proposed removing the term `` `verified' status
button'' to reflect the current user interface of the database and
adding the phrase ``or its agents'' to clarify who may request
documents. VA proposed deleting the words ``a pattern of'' to clarify
the requirements necessary to remove a company for failure to provide
requested information. VA also proposed removing the term
``application'' as VA Form 0877 reflects current program requirements.
VA additionally proposed changing the phrase `60 days' to `30 days' to
conform with revised Sec. 74.3(f)(1). Considering the comments
received on Sec. 74.21(d), VA sees no basis in making any additional
amendments to the regulations based on these comments. As there are no
other comments on Sec. 74.21(d), VA is adopting the amendments exactly
as proposed.
O. Section 74.22
VA proposed amending Sec. 74.22(a) to note the beginning of the
relevant 30-day time period as the date on which CVE sends notice of
proposed cancellation of verified status. VA additionally proposed to
amend Sec. 74.22(e) to implement the new appeals procedure to OHA
prescribed in the NDAA. VA did not receive any comments on the proposed
amendment to Sec. 74.22 and is therefore adopting the amendments as
proposed.
P. Sections 74.25 and 74.26
VA proposed amending Sec. 74.25 to replace ``the Department'' with
``VA'' and amending Sec. 74.26 to add more specificity to the
regulation concerning the information to be submitted for verification.
VA received one comment on the proposed revision to Sec. 74.26 which
stated that it needed OMB authorization. In response, without more
specific information, VA is unaware of the requirement for obtaining
OMB authorization for Sec. 74.26 other than the ordinary review
process. Moreover, there are no material amendments to Sec. 74.26 as
the language is merely being refined. Therefore, VA sees no basis in
making any additional amendments to the regulations based on the
comment. As no other comments to Sec. Sec. 74.25 and 74.26 were
received, VA is adopting the amendments exactly as proposed.
Q. Section 74.27
VA amends Sec. 74.27 to outline document storage requirements. VA
received one comment on Sec. 74.27 that it needed OMB authorization.
In response, without more specific information, VA is unaware of the
requirement for obtaining OMB authorization for the provisions
contained Sec. 74.27 other than the ordinary review process. Moreover,
the amendment to Sec. 74.27 is not substantive. There are no material
amendments to Sec. 74.27. VA proposed amending Sec. 74.27 to reword
the first sentence to specify that all documents submitted will be
stored electronically. ``Vendor Information Pages'' is changed to
``CVE'' and the location reference is removed. The second sentence is
revised to indicate that owner information will be compared to
available records. In addition, information is added regarding records
management procedures and data breaches. Therefore, VA sees no basis in
making any additional amendments to the regulations based on the
comment. As no other comments on the amendments to Sec. 74.27 were
received, VA is adopting the amendments exactly as proposed.
R. Sections 74.28 and 74.29
VA proposed amending Sec. 74.28 to replace `Department of Veterans
Affairs' and `Center for Veterans Enterprise' with VA and CVE,
respectively and Sec. 74.29 to refer to VA's records management
procedures. VA did not receive any comments on the proposed amendments
to Sec. Sec. 74.28 and 74.29 and is therefore adopting the amendments
as proposed.
Effect of Rulemaking
The Code of Federal Regulations, as proposed to be revised by this
rulemaking, would represent the exclusive legal authority on this
subject. No contrary rules or procedures would be authorized. All VA
guidance would be read to conform with the rule finally adopted if
possible or, if not possible, such guidance would be superseded.
Justification for the October 1, 2018 Effective Date
The Administrative Procedure Act (APA) requires that ``publication
or service of a substantive rule shall be made not less than 30 days
before its effective date, except . . . as otherwise provided by the
agency for good cause found and published with the rule.'' 5 U.S.C.
553(d)(3). The purpose of the APA provision delaying the effective date
of a rule for 30 days after publication is to provide interested and
affected members of the public sufficient time to adjust their behavior
before the rule takes effect. For the reasons set forth below, VA finds
that good cause exists to make this final rule become effective on
October 1, 2018, less than 30 days after it is published in the Federal
Register.
As noted above, VA and the SBA have been working together to
jointly implement the provisions of NDAA 2017. In doing so, VA and the
SBA believe a single date on which all of the changes go into effect is
the most effective path for implementation. VA and the SBA consider
October 1, 2018 to be the best date for implementation of new unified
rules for the programs. October 1, 2018 is the start of the new fiscal
year, and is therefore the best date for separation of contract actions
between different sets of regulations.
[[Page 48228]]
Having contract actions applying different regulations in the same
fiscal year can often lead to confusion among contracting officials,
and program participants. Procurements conducted in fiscal year 2018
will generally follow the old rules, while all new procurements in
fiscal year 2019 will follow the new jointly developed regulations
which VA believes will lead to less confusion.
In addition to the joint effort in implementing these provisions of
NDAA 2017, VA has in a related rule making process implemented Sections
1932 and 1833 of NDAA 2017. These sections dealt with the transition of
certain protest and appeal functions from the VA to SBA's Office of
Hearings and Appeals. The final rule implementing those sections also
has an implementation date of October 1, 2018. 83 FR 13626.
VA and SBA believe that a uniform transition combining the programs
ownership and control requirements is extremely important. As such, VA
believes that an earlier effective date that aligns with the new fiscal
year for contracting, and with the other changes implementing NDAA 2017
is the best course of action.
Paperwork Reduction Act
This rule contains no provision constituting a collection of
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).
Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as
amended, requires Federal agencies to consider the potential impact of
regulations on small entities during rulemaking. Small entities include
small businesses, small not-for-profit organizations, and small
governmental jurisdictions. Section 605 of the RFA allows an agency to
certify a rule, in lieu of preparing an analysis, if the rulemaking is
not expected to have a significant economic impact on a substantial
number of small entities.
This rule making has an average cost to the small business of $803,
and it would apply only to applying for verified status in the VIP
database. The regulation merely clarifies and streamlines the existing
rule and adds no additional burdens or restrictions on applicants or
participants regarding VA's VOSB Verification Program. The overall
impact of the rule is of benefit to small businesses owned by veterans
or service-disabled veterans.
The overall impact of the rule will not affect small businesses
owned and controlled by veterans and service-disabled veterans. The
rule removes ownership and control from 38 CFR part 74 which will be
assumed under a separate set of regulations promulgated by SBA. The
rule also refines and clarifies process steps and removes post
examination review. Post examination review will also be assumed under
a separate set of regulations.
Examination of businesses seeking verification as veteran-owned
small businesses or service-disabled veteran-owned small businesses
seeking VA set aside contract opportunities is through the examination
model. The examination model revises the verification process by
assigning dedicated case analysts and providing applicants with
additional access to VA staffers during verification.
From December 2016 through February 2017, 352 small businesses that
completed the process and received determination letters participated
in a follow-up survey detailing their costs and the attribution of the
costs. Seventy-three (73) percent of participating businesses had
either $0 costs or responded not applicable; 14 percent estimated costs
between $1 and $1,000; 3 percent responded with a cost estimate between
$1,001 and $2,000; 3 percent responded with a cost estimate between
$2,001 and $3,000; 2 percent responded with a cost estimate between
$3,001 and $4,000; 2 percent responded with a cost estimate between
$4,001 and $5,000; and 4 percent responded with a cost estimate over
$5,000. The average cost of all businesses providing survey responses
was $803 per business. The largest cost categories were employee costs,
attorney costs, travel/printing, consultants, and accountants.
Currently, there are 14,560 verified companies in VA's database and
approximately 2,100 companies with applications in process. In
addition, no comments were received regarding RFA issues. Therefore,
the Secretary certifies that the adoption of this proposed rule would
not have a significant economic impact on a substantial number of small
entities as they are defined in the Regulatory Flexibility Act.
Therefore, under 5 U.S.C. 605(b), this rulemaking is exempt from the
initial and final regulatory flexibility analysis requirements of
sections 603 and 604.
Executive Orders 12866, 13563, and 13771
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, and other advantages, distributive impacts
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
Executive Order 12866 (Regulatory Planning and Review) defines a
``significant regulatory action,'' which requires review by the Office
of Management and Budget (OMB), as ``any regulatory action that is
likely to result in a rule that may: (1) Have an annual effect on the
economy of $100 million or more or adversely affect in a material way
the economy, a sector of the economy, productivity, competition, jobs,
the environment, public health or safety, or State, local, or tribal
governments or communities; (2) Create a serious inconsistency or
otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
this Executive Order.''
The economic, interagency, budgetary, legal, and policy
implications of this regulatory action have been examined, and it has
been determined not to be a significant regulatory action under
Executive Order 12866. VA's impact analysis can be found as a
supporting document at http://www.regulations.gov, usually within 48
hours after the rulemaking document is published. Additionally, a copy
of the rulemaking and its impact analysis are available on VA's website
at http://www.va.gov/orpm by following the link for VA Regulations
Published from FY 2004 through FYTD. This rule is not an E.O. 13771
regulatory action because this rule is not significant under E.O.
12866.
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C.
1532, that agencies prepare an assessment of anticipated costs and
benefits before issuing any rule that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more (adjusted annually for
inflation) in any one year. This rule will not have such effect on
State, local, and tribal governments, or on the private sector.
Catalog of Federal Domestic Assistance
This rule will affect the verification guidelines of veteran-owned
small
[[Page 48229]]
businesses, for which there is no Catalog of Federal Domestic
Assistance program number.
List of Subjects in 38 CFR Part 74
Administrative practice and procedure, Affiliation, Appeals,
Application guidelines, Control requirements, Definitions, Eligibility
requirements, Eligibility term, Ownership requirements, Procedures for
cancellation, Reapplication, Records management, Request for
reconsideration, Verification examination.
Signing Authority
The Secretary of Veterans Affairs approved this document and
authorized the undersigned to sign and submit the document to the
Office of the Federal Register for publication electronically as an
official document of the Department of Veterans Affairs. Robert L.
Wilkie, Secretary, Department of Veterans Affairs, approved this
document on September 12, 2018, for publication.
Dated: September 12, 2018.
Jeffrey M. Martin,
Impact Analyst, Office of Regulation Policy & Management, Office of the
Secretary, Department of Veterans Affairs.
For the reasons set forth in the preamble, we amend 38 CFR part 74
as follows:
PART 74--VETERANS SMALL BUSINESS REGULATIONS
0
1. The authority citation for part 74 is revised to read as follows:
Authority: 38 U.S.C. 501 and 513, unless otherwise noted.
0
2. Revise Sec. 74.1 to read as follows:
Sec. 74.1 What definitions are important for Vendor Information Pages
(VIP) Verification Program?
For the purpose of this part, the following definitions apply:
Applicant means a firm applying for inclusion in the VIP database.
Application days means the time period from when a veteran
registers for verification to the time of a determination, excluding
any days in which CVE is waiting for the firm to submit information or
documentation necessary for the office to continue processing the
application.
Center for Verification and Evaluation (CVE) is an office within
the U.S. Department of Veterans Affairs (VA) and is a subdivision of
VA's Office of Small and Disadvantaged Business Utilization. CVE
receives and reviews all applications for eligibility under this part
and maintains the VIP database. CVE assists VA contracting offices to
identify veteran-owned small businesses and communicates with the Small
Business Administration (SBA) with regard to small business status.
Days are calendar days unless otherwise specified. In computing any
period of time described in this part, the day from which the period
begins to run is not counted, and when the last day of the period is a
Saturday, Sunday, or Federal holiday, the period extends to the next
day that is not a Saturday, Sunday, or Federal holiday. Similarly, in
circumstances where CVE is closed for all or part of the last day, the
period extends to the next day on which the agency is open.
Eligible individual means a veteran, service-disabled veteran, or
surviving spouse, as defined in the United States Code and the
regulation promulgated by the SBA, currently 13 CFR part 125.
Joint venture is an association of two or more business concerns
for which purpose they combine their efforts, property, money, skill,
or knowledge in accordance with 13 CFR part 125. A joint venture must
be comprised of at least one veteran-owned small business. For VA
contracts, a joint venture must be in the form of a separate legal
entity.
Non-veteran means any individual who does not claim veteran status,
or upon whose status an applicant or participant does not rely in
qualifying for the VIP Verification Program participation.
Office of Small and Disadvantaged Business Utilization (OSDBU) is
the office within VA that establishes and monitors small business
program goals at the prime and subcontract levels. OSDBU works with VA
Acquisitions to ensure the creation and expansion of small businesses
opportunities by promoting the use of set-aside contracting vehicles
within VA procurement. OSDBU connects and enables veterans to gain
access to these Federal procurement opportunities. The Executive
Director, OSDBU, is the VA liaison with the SBA. Information copies of
correspondence sent to the SBA seeking a certificate of competency
determination must be concurrently provided to the Director, OSDBU.
Before appealing a certificate of competency, the Head of Contracting
Activity must seek concurrence from the Director, OSDBU.
Participant has the same meaning given to such term in 13 CFR part
125.
Primary industry classification means the six-digit North American
Industry Classification System (NAICS) code designation which best
describes the primary business activity of the participant. The NAICS
code designations are described in the NAICS Manual published by the
U.S. Office of Management and Budget.
Principal place of business means the business location where the
individuals who manage the concern's daily business operations spend
most working hours and where top management's current business records
are kept. If the office from which management is directed and where the
current business records are kept are in different locations, CVE will
determine the principal place of business for program purposes.
Register means the initiation of an application for verification or
reverification by the business owner or a business representative.
Service-disabled veteran has the same meaning given to such term in
13 CFR part 125.
Service-disabled veteran-owned small business concern (SDVOSB) has
the same meaning given to such term in 13 CFR part 125.
Small business concern (SBC) has the same meaning given to such
term in 13 CFR part 125.
Surviving spouse has the same meaning given to such term in 13 CFR
part 125.
VA is the U.S. Department of Veterans Affairs.
Vendor Information Pages (VIP) is a database of businesses eligible
to participate in VA's Veteran-owned Small Business Program. The online
database may be accessed at no charge via the internet at https://www.va.gov/osdbu.
Verification eligibility period is a 3-year period that begins on
the date CVE issues its approval letter establishing verified status.
The participant must submit a new application for each eligibility
period to continue eligibility.
Veteran has the same meaning given to such term in 13 CFR part 125.
Veteran-owned small business concern (VOSB) has the same meaning
given to such term in 13 CFR part 125.
Veterans Affairs Acquisition Regulation (VAAR) is the set of rules
that specifically govern requirements exclusive to VA prime and
subcontracting actions. The VAAR is chapter 8 of title 48, Code of
Federal Regulations, and supplements the Federal Acquisition Regulation
(FAR), which contains guidance applicable to most Federal agencies.
0
3. Revise Sec. 74.2 to read as follows:
Sec. 74.2 What are the eligibility requirements a concern must meet
for the VIP Verification Program?
(a) Ownership and control. A small business concern must be
[[Page 48230]]
unconditionally owned and controlled by one or more eligible veterans,
service-disabled veterans or surviving spouses, have completed the
online VIP database forms, submitted required supplemental
documentation at http://www.va.gov/osdbu, and have been examined by
VA's CVE. Such businesses appear in the VIP database as ``verified''.
(b) Good character and exclusions in System for Award Management
(SAM). Individuals having an ownership or control interest in verified
businesses must have good character. Debarred or suspended concerns or
concerns owned or controlled by debarred or suspended persons are
ineligible for VIP Verification. Concerns owned or controlled by a
person(s) who is currently incarcerated, or on parole or probation
(pursuant to a pre-trial diversion or following conviction for a felony
or any crime involving business integrity) are ineligible for VIP
Verification. Concerns owned or controlled by a person(s) who is
formally convicted of a crime set forth in 48 CFR 9.406-2(b)(3) are
ineligible for VIP Verification during the pendency of any subsequent
legal proceedings. If, after verifying a participant's eligibility, the
person(s) controlling the participant is found to lack good character,
CVE will immediately remove the participant from the VIP database,
notwithstanding the provisions of Sec. 74.22.
(c) False statements. If, during the processing of an application,
CVE determines, by a preponderance of the evidence standard, that an
applicant has knowingly submitted false information, regardless of
whether correct information would cause CVE to deny the application,
and regardless of whether correct information was given to CVE in
accompanying documents, CVE will deny the application. If, after
verifying the participant's eligibility, CVE discovers that false
statements or information have been submitted by a firm, CVE will
remove the participant from the VIP database immediately,
notwithstanding the provisions of Sec. 74.22. Whenever CVE determines
that the applicant submitted false information, the matter will be
referred to the VA Office of Inspector General for review. In addition,
CVE will request that debarment proceedings be initiated by the
Department.
(d) Financial obligations. Neither an applicant firm nor any of its
eligible individuals that fails to pay significant financial
obligations, including unresolved tax liens and defaults on Federal
loans or State or other government assisted financing, owed to the
federal government, the District of Columbia or any state, district, or
territorial government of the United States, is eligible for VIP
Verification. If after verifying the participant's eligibility CVE
discovers that the participant no longer satisfies this requirement,
CVE will remove the participant from the VIP database in accordance
with Sec. 74.22.
(e) Protest Decisions or other negative findings. Any firm verified
in the VIP database that is found to be ineligible by a SDVOSB/VOSB
status protest decision will be immediately removed from the VIP
database, notwithstanding the provisions of Sec. 74.22. Any firm
verified in the VIP database that is found to be ineligible due to a
U.S. Small Business Administration (SBA) protest decision or other
negative finding may be immediately removed from the VIP database,
notwithstanding the provisions of Sec. 74.22. Until such time as CVE
receives official notification that the firm has proven that it has
successfully overcome the grounds for the determination, that the
decision is overturned on appeal, or the firm applies for and receives
verified status from CVE, the firm will not be eligible to participate
in the 38 U.S.C. 8127 program.
(f) System for Award Management (SAM) registration. All applicants
for VIP Verification must be registered in SAM at http://www.sam.gov
prior to application submission.
0
4. Revise Sec. 74.3 to read as follows:
Sec. 74.3 Who does CVE consider to own a veteran-owned small
business?
(a) Ownership. Ownership is determined in accordance with 13 CFR
part 125. However, where 13 CFR part 125 is limited to SDVOSBs, CVE
applies the same ownership criteria to firms seeking verified VOSB
status.
(b) Change of ownership. (1) A participant may remain eligible
after a change in its ownership or business structure, so long as one
or more veterans own and control it after the change. The participant
must file an updated VA Form 0877 and supporting documentation
identifying the new veteran owners or the new business interest within
30 days of the change.
(2) Any participant that is performing contracts and desires to
substitute one veteran owner for another shall submit a proposed
novation agreement and supporting documentation in accordance with FAR
subpart 42.12 to the contracting officer prior to the substitution or
change of ownership for approval.
(3) Where the transfer results from the death or incapacity due to
a serious, long-term illness or injury of an eligible principal, prior
approval is not required, but the concern must file an updated VA Form
0877 with CVE within 60 days of the change. Existing contracts may be
performed to the end of the instant term. However, no options may be
exercised.
(4) Continued eligibility of the participant with new ownership
requires that CVE verify that all eligibility requirements are met by
the concern and the new owners.
0
5. Revise Sec. 74.4 to read as follows:
Sec. 74.4 Who does CVE consider to control a veteran-owned small
business?
Control is determined in accordance with 13 CFR part 125. However,
where 13 CFR part 125 is limited to SDVOSBs, CVE applies the same
control criteria to firms seeking verified VOSB status.
0
6. Revise Sec. 74.5 to read as follows:
Sec. 74.5 How does CVE determine affiliation?
(a) CVE does not determine affiliation. Affiliation is determined
by the SBA in accordance with 13 CFR part 121.
(b) Joint ventures may apply for inclusion in the VIP Verification
Program. To be eligible for inclusion in the VIP Verification Program,
a joint venture must demonstrate that:
(1) The underlying VOSB upon which eligibility is based is verified
in accordance with this part; and
(2) The joint venture agreement complies with the requirements set
forth in 13 CFR part 125 for SDVOSBs. However, while 13 CFR part 125 is
limited to SDVOSBs, CVE will apply the same requirements to joint
venture firms seeking verified VOSB status.
0
7. Revise Sec. 74.10 to read as follows:
Sec. 74.10 Where must an application be filed?
An application for VIP Verification status must be electronically
filed in the Vendor Information Pages database located on the CVE's Web
portal, http://www.va.gov/osdbu. Guidelines and forms are located on
the Web portal. Upon receipt of the applicant's electronic submission,
an acknowledgment message will be dispatched to the concern containing
estimated processing time and other information. Address information
for CVE is also located on the Web portal.
(The Office of Management and Budget has approved the information
collection requirements in this section under control number 2900-
0675.)
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8. Revise Sec. 74.11 to read as follows:
[[Page 48231]]
Sec. 74.11 How does CVE process applications for VIP Verification
Program?
(a) The Director, CVE, is authorized to approve or deny
applications for VIP Verification. CVE will receive, review, and
examine all VIP Verification applications. Once an applicant registers,
CVE will contact the applicant within 30 days to initiate the process.
If CVE is unsuccessful in its attempts to contact the applicant, the
application will be administratively removed. If CVE is successful in
initiating contact with the applicant, CVE will advise the applicant of
required documents and the timeline for submission. If the applicant
would be unable to provide conforming documentation, the applicant will
be given the option to withdraw its application. CVE will process an
application for VIP Verification status within 90 application days,
when practicable, of receipt of a registration. Incomplete application
packages will not be processed.
(b) CVE, in its sole discretion, may request clarification of
information relating to eligibility at any time in the eligibility
determination process. CVE will take into account any clarifications
made by an applicant in response to a request for such by CVE.
(c) CVE, in its sole discretion, may request additional
documentation at any time in the eligibility determination process.
Failure to adequately respond to the documentation request shall
constitute grounds for a denial or administrative removal.
(d) An applicant's eligibility will be based on the totality of
circumstances existing on the date of application, except where
clarification is made pursuant to paragraph (b) of this section,
additional documentation is submitted pursuant to paragraph (c) of this
section, as provided in paragraph (e) of this section or in the case of
amended documentation submitted pursuant to Sec. 74.13(a). The
applicant bears the burden to establish its status as a VOSB.
(e) Changed circumstances for an applicant occurring subsequent to
its application and which affect eligibility will be considered and may
constitute grounds for denial of the application. The applicant must
inform CVE of any changed circumstances that could affect its
eligibility for the program (i.e., ownership or control changes) during
its application review.
(1) Bankruptcy. Bankruptcy is a change in circumstance requiring
additional protection for the agency. Should a VOSB enter into
bankruptcy the participant must:
(i) Inform CVE of the filing event within 30 days;
(ii) Specify to CVE whether the concern has filed Chapter 7, 11, or
13 under U.S. Bankruptcy code; and
(iii) Any participant that is performing contracts must assure
performance to the contracting officer(s) prior to any reorganization
or change if necessary including such contracts in the debtor's estate
and reorganization plan in the bankruptcy.
(2) [Reserved]
(f) The decision of the Director, CVE, to approve or deny an
application will be in writing. A decision to deny verification status
will state the specific reasons for denial and will inform the
applicant of any appeal rights.
(g) If the Director, CVE, approves the application, the date of the
approval letter is the date of participant verification for purposes of
determining the participant's verification eligibility term.
(h) The decision may be sent by mail, commercial carrier, facsimile
transmission, or other electronic means. It is the responsibility of
the applicant to ensure all contact information is current in the
applicant's profile.
(The Office of Management and Budget has approved the information
collection requirements in this section under control number 2900-
0675.)
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9. Revise Sec. 74.12 to read as follows:
Sec. 74.12 What must a concern submit to apply for VIP Verification
Program?
Each VIP Verification applicant must submit VA Form 0877 and
supplemental documentation as CVE requires. All electronic forms are
available on the VIP database web pages. From the time the applicant
dispatches the VA Form 0877, the applicant must also retain on file, at
the principal place of business, a complete copy of all supplemental
documentation required by, and provided to, CVE for use in verification
examinations. The documentation to be submitted to CVE includes, but is
not limited to: Articles of Incorporation/Organization; corporate by-
laws or operating agreements; shareholder agreements; voting records
and voting agreements; trust agreements; franchise agreements,
organizational, annual, and board/member meeting records; stock ledgers
and certificates; State-issued Certificates of Good Standing; contract,
lease and loan agreements; payroll records; bank account signature
cards; financial statements; Federal personal and business tax returns
for up to 3 years; and licenses.
(The Office of Management and Budget has approved the information
collection requirements in this section under control number 2900-
0675.)
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10. Amend Sec. 74.13 by revising the section heading and paragraphs
(a) and (b) to read as follows
Sec. 74.13 Can an applicant appeal CVE's initial decision to deny an
application?
(a) An applicant may appeal CVE's decision to deny an application
by filing an appeal with the United States Small Business
Administration (SBA) Office of Hearings and Appeals (OHA) after the
applicant receives the denial in accordance with 13 CFR part 134. The
filing party bears the risk that the delivery method chosen will not
result in timely receipt by OHA.
(b) A denial decision that is based on the failure to meet any
veteran eligibility criteria is not subject to appeal and is the final
decision of CVE.
* * * * *
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11. Revise Sec. 74.14 to read as follows:
Sec. 74.14 Can an applicant or participant reapply for admission to
the VIP Verification Program?
(a) Once an application, an appeal of a denial of an application,
or an appeal of a verified status cancellation has been denied, or a
verified status cancellation which was not appealed has been issued,
the applicant or participant shall be required to wait for a period of
6 months before a new application will be processed by CVE.
(b) Participants may reapply prior to the termination of their
eligibility period. If a participant is found to be ineligible, the
participant will forfeit any time remaining on their eligibility period
and will be immediately removed from the VIP Verification database. An
applicant removed pursuant to this section may appeal the decision to
OHA in accordance with Sec. 74.13. The date of a new determination
letter verifying an applicant will be the beginning of the next 3-year
eligibility period.
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12. Revise Sec. 74.15 to read as follows:
Sec. 74.15 What length of time may a business participate in VIP
Verification Program?
(a) A participant receives an eligibility term of 3 years from the
date of CVE's approval letter establishing verified status.
(b) The participant must maintain its eligibility during its tenure
and must inform CVE of any changes that would affect its eligibility
within 30 days.
(c) The eligibility term may be shortened by removal pursuant to
Sec. 74.2, application pursuant to Sec. 74.14(b), voluntary
withdrawal by the participant pursuant to Sec. 74.21, or cancellation
pursuant to Sec. 74.22.
(d) CVE may initiate a verification examination whenever it
receives
[[Page 48232]]
credible information concerning a participant's eligibility as a VOSB.
Upon its completion of the examination, CVE will issue a written
decision regarding the continued eligibility status of the questioned
participant.
(e) If CVE finds that the participant does not qualify as a VOSB,
the procedures at Sec. 74.22 will apply, except as provided in Sec.
74.2.
(f) If CVE finds that the participant continues to qualify as a
VOSB, the original eligibility period remains in effect.
0
13. Revise Sec. 74.20 to read as follows:
Sec. 74.20 What is a verification examination and what will CVE
examine?
(a) General. A verification examination is an investigation by CVE
officials, which verifies the accuracy of any statement or information
provided as part of the VIP Verification application process. Thus,
examiners may verify that the concern currently meets the eligibility
requirements, and that it met such requirements at the time of its
application or its most recent size recertification. An examination may
be conducted on a random, unannounced basis, or upon receipt of
specific and credible information alleging that a participant no longer
meets eligibility requirements.
(b) Scope of examination. CVE may conduct the examination at one or
all of the participant's offices or work sites. CVE will determine the
location(s) of the examination. CVE may review any information related
to the concern's eligibility requirements including, but not limited
to, documentation related to the legal structure, ownership, and
control. Examiners may review any or all of the organizing documents,
financial documents, and publicly available information as well as any
information identified in Sec. 74.12.
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14. Revise Sec. 74.21 to read as follows:
Sec. 74.21 What are the ways a business may exit VIP Verification
Program status?
A participant may:
(a) Voluntarily cancel its status by submitting a written request
to CVE requesting that the concern be removed from public listing in
the VIP database; or
(b) Delete its record entirely from the VIP database; or
(c) CVE may remove a participant immediately pursuant to Sec.
74.2; or
(d) CVE may remove a participant from public listing in the VIP
database for good cause upon formal notice to the participant in
accordance with Sec. 74.22. Examples of good cause include, but are
not limited to, the following:
(1) Submission of false information in the participant's VIP
Verification application.
(2) Failure by the participant to maintain its eligibility for
program participation.
(3) Failure by the participant for any reason, including the death
of an individual upon whom eligibility was based, to maintain
ownership, management, and control by veterans, service-disabled
veterans, or surviving spouses.
(4) Failure by the concern to disclose to CVE the extent to which
non-veteran persons or firms participate in the management of the
participant.
(5) Failure to make required submissions or responses to CVE or its
agents, including a failure to make available financial statements,
requested tax returns, reports, information requested by CVE or VA's
Office of Inspector General, or other requested information or data
within 30 days of the date of request.
(6) Cessation of the participant's business operations.
(7) Failure by the concern to provide an updated VA Form 0877
within 30 days of any change in ownership, except as provided in Sec.
74.3(f)(3).
(8) Failure to inform CVE of any such changed circumstances, as
outlined in paragraphs (c) and (d) of this section.
(9) Failure by the concern to obtain and keep current any and all
required permits, licenses, and charters, including suspension or
revocation of any professional license required to operate the
business.
(e) The examples of good cause listed in paragraph (d) of this
section are intended to be illustrative only. Other grounds for
canceling a participant's verified status include any other cause of so
serious or compelling a nature that it affects the present
responsibility of the participant.
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15. Amend Sec. 74.22 by revising paragraphs (a) and (e) to read as
follows:
Sec. 74.22 What are the procedures for cancellation?
(a) General. When CVE believes that a participant's verified status
should be cancelled prior to the expiration of its eligibility term,
CVE will notify the participant in writing. The Notice of Proposed
Cancellation Letter will set forth the specific facts and reasons for
CVE's findings and will notify the participant that it has 30 days from
the date CVE sent the notice to submit a written response to CVE
explaining why the proposed ground(s) should not justify cancellation.
* * * * *
(e) Appeals. A participant may file an appeal with OHA concerning
the Notice of Verified Status Cancellation decision in accordance with
13 CFR part 134. The decision on the appeal shall be final.
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16. Revise Sec. 74.25 to read as follows:
Sec. 74.25 What types of personally identifiable information will VA
collect?
In order to establish owner eligibility, VA will collect individual
names and Social Security numbers for veterans, service-disabled
veterans, and surviving spouses who represent themselves as having
ownership interests in a specific business seeking to obtain verified
status.
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17. Revise Sec. 74.26 to read as follows:
Sec. 74.26 What types of business information will VA collect?
VA will examine a variety of business records. See Sec. 74.12,
``What must a concern submit to apply for VIP Verification Program?''
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18. Revise Sec. 74.27 to read as follows:
Sec. 74.27 How will VA store information?
VA stores records provided to CVE fully electronically on the VA's
secure servers. CVE personnel will compare information provided
concerning owners against any available records. Any records collected
in association with the VIP verification program will be stored and
fully secured in accordance with all VA records management procedures.
Any data breaches will be addressed in accordance with the VA
information security program.
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19. Revise Sec. 74.28 to read as follows:
Sec. 74.28 Who may examine records?
Personnel from VA, CVE, and its agents, including personnel from
the SBA, may examine records to ascertain the ownership and control of
the applicant or participant.
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20. Revise Sec. 74.29 to read as follows:
Sec. 74.29 When will VA dispose of records?
The records, including those pertaining to businesses not
determined to be eligible for the program, will be kept intact and in
good condition and retained in accordance with VA records management
procedures following a program examination or the date of the last
Notice of Verified Status Approval letter. Longer retention will not be
required unless a written request is received from the Government
Accountability Office not later than 30 days prior to the end of the
retention period.
[FR Doc. 2018-20639 Filed 9-21-18; 8:45 am]
BILLING CODE 8320-01-P